Shock as Microsoft chief quits after a year

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Microsoft surprised investors with the shock resignation of Rick Belluzzo, the software giant's president and chief operating officer and most highly ranked executive behind founder Bill Gates and chief executive Steve Ballmer.

Some observers suggested he had been pushed as punishment for the slow progress of Microsoft's computer game-playing console, the Xbox. He had spent one year in the job.

Shares in Microsoft, the world's largest software maker, edged up slightly in early trading in New York as investors welcomed a reorganisation plan that accompanied news of Mr Belluzzo's departure.

"It is the right decision for Rick, but the company will certainly miss his leadership and experience," Mr Ballmer said. Microsoft has not said whether it will replace him.

Mr Belluzzo, 48, who joined Microsoft from Silicon Graphics in 1999 and was elevated to his present position in February last year, said he would start relinquishing his role on 1 May and would exit the company completely by September. Analysts expect him to seek a chief executive position with another software company.

Mr Belluzzo swatted away suggestions that he had been harbouring thoughts of one day replacing either Mr Ballmer or Mr Gates. "I think Bill and Steve will be around for some time ... so I never thought that was my ambition here," he said.

The restructuring plan gives more responsibility to the heads of the seven core units of Microsoft. The new emphasis on autonomy for these divisions could herald an eventual break-up of Microsoft into several different companies.

The new arrangement, conceived by Mr Ballmer, itself spelled a diminished role for Mr Belluzzo, whose career has also included 23 years at Hewlett-Packard. Without the prospect of a more influential role in the company, it seemed unlikely that he could have stayed.

Mr Belluzzo's image inside Microsoft may have suffered because of the disappointing performance of its new consumer products, including the Xbox, which has had a hard time making inroads on the competition, Nintendo and Sony.

"They're having some difficult budgetary problems," said Rob Enderle of the Giga Information Group. "Revenue's off and clearly they're gong to have to do some cost-cutting."

Mr Ballmer has indicated that he does expect to fill the chief operating officer post again as part of his new streamlined vision for the company.