Internet: Veteran Leaves in Microsoft Shake-up

The head of Microsoft's Windows and web operations is leaving the Seattle-based software empire in a shake-up widely viewed as the fallout from the company's failed bid for internet portal Yahoo.

Kevin Johnson, a senior lieutenant to Microsoft's chief executive, Steve Ballmer, is to become head of Juniper Networks, a manufacturer of telecoms equipment.

His departure came as Microsoft told an analysts' briefing that it intended to make steep investments in online activities to try to keep pace with Google. Among Microsoft's initiatives is likely to be an expanded relationship with Facebook, in which it has a 1.6% stake.

Johnson, who has been at Microsoft for 16 years, was instrumental in the company's recent $47.5bn (£24bn) takeover offer for Yahoo which floundered on disagreements over the valuation. He was one of a small group of Microsoft executives who worked to try to clinch the deal.

Known within Microsoft as KJ, he presided over a department of 14,000 people responsible for the company's Windows operating system and for internet operations such as Hotmail and MSN search.

Microsoft said the division would be split, with both the Windows and web operations reporting directly to Ballmer.

"This new structure will give us more agility and focus in two very competitive areas," said Ballmer.

Microsoft has faced criticism from analysts over its internet strategy. It has struggled to match the rapid rate of innovation and growth shown by Google.

The precise reason for Johnson's departure was unclear. Matt Rosoff, an analyst at the independent consultancy Directions on Microsoft, said: "Whether it was his decision to leave, or whether it was based on recent events probably related to Yahoo and the online segment's last-quarter performance, I don't know."

Johnson's exit comes amid big changes at Microsoft, where founder Bill Gates stepped down from day-to-day involvement last month to concentrate on philanthropy.

In a company-wide email leaked yesterday to the technology blog All Things Digital, Ballmer told employees that the failure of the Yahoo deal was not a significant setback. "I want to emphasize the point I've been making all along - Yahoo was a tactic, not a strategy," wrote Ballmer, who said a takeover would have increased Microsoft's share of online search queries and created a bigger pool of advertisers. "Yahoo would have helped us get there faster. But we will get there with or without Yahoo."