In an e-mail to employees Tuesday, Microsoft CEO Steve Ballmer spelled out his plans for the company’s reorganization into three new divisions.

Under the subject heading of “Organizational Changes for Next Wave of Growth & Innovation,” Ballmer said, “Today, we are announcing the creation of three new business divisions—Microsoft Platform Products & Services Division, which will be led by Kevin Johnson and Jim Allchin as co-Presidents; Microsoft Business Division to be led by Jeff Raikes as President; and Microsoft Entertainment & Devices Division, which will be led by Robbie Bach as President.”

Ballmer’s e-mail said the company would conduct an internal Webcast for its employees Tuesday at 2 p.m. Pacific time to discuss the reorganization and answer questions.

As part of the reorganization, Ballmer said, Jim Allchin, Microsoft Corp.’s former group vice president of platforms and newly announced co-president of the new Microsoft Platform Products & Services Division, will retire at the end of calendar year 2006.

“Jim Allchin is announcing his plans to retire from Microsoft at the end of calendar year 2006 following the commercial availability of Windows Vista,” Ballmer’s e-mail said.

“This is a personal decision that Jim has spent a great deal of time thinking about and that I know was a difficult one for him to make. Jim and Kevin Johnson, who will succeed Jim, will serve as co-presidents until Jim’s retirement next year.

“I know I speak for the entire Microsoft family when I say how proud we are of Jim’s accomplishments here. Jim has had an immeasurable impact on our success. Millions of customers are able to realize their potential every day thanks to software on which Jim was a key visionary and design architect.”

Read more here about Microsoft’s reorganization announcement and Allchin’s retirement.

Meanwhile, the new Platform Products & Services Division will include Windows Client, Server & Tools and MSN. “Our MSN organization has a track record of innovating quickly and delivering software-based services at scale, while the existing platforms groups possess great expertise in creating a software platform and user experience that touches millions of people,” Ballmer said

In addition, Ballmer said Eric Rudder, formerly Microsoft’s senior vice president of the company’s server and tools business, “will be taking on a new role working directly for Bill [Gates] focusing on some of the company’s key advanced development efforts as well as overall technical strategy.

“Eric has done a great job of driving broad usage of .Net with developers and has led incredible growth and success of the server and tools business. Eric will transition into his new role following the launch of Visual Studio and SQL Server 2005 later this year.”

Services will be a big play for the new Microsoft, Ballmer said.

“Our goal in making these changes is to enable Microsoft to achieve greater agility in managing the incredible growth ahead and executing our software-based services strategy,” he said in his e-mail.

“Ray Ozzie will expand his role of chief technical officer by assuming responsibility for driving our software-based services strategy and execution across all three new divisions. Under Ray’s technical leadership and weaving together both software and software-based services, I see incredible opportunity to better address the changing needs of our customers’ digital lifestyles and the new world of work. Ray will continue to report to Bill.”

Meanwhile, Jeff Raikes will lead the new Microsoft Business Division, which combines the Information Worker business and MBS, Ballmer said.

“With the new division, we have a unique opportunity to take Office to a new level by more deeply infusing it with the capabilities needed to address core business processes within organizations,” he said.

Robbie Bach will lead the new Microsoft Entertainment & Devices Division, which “brings together the Home & Entertainment Division with our Mobile & Embedded Devices Division—thus consolidating our industry engagement around devices to deliver even richer and more relevant scenarios for individuals at work and at home. It will also bring more focus to our efforts in entertainment and related devices and services,” the Ballmer e-mail said.

Is it about time for Microsoft to reorganize? Click here to read Scot Petersen’s commentary.

Ballmer said he sees the three business units as poised for growth. “The establishment of these president positions reflects the critical importance I place upon having strong leadership in all three groups and a commitment to ensure we continue to exceed our customers’ expectations for years to come,” he added.

However, some question the reorganization.

“Microsoft claims that the new structure will create many synergies between like product groups and foster collaboration and even improve product development,” said Joe Wilcox, an analyst with Jupiter Research in Washington. “But if Microsoft is wrong, the new structure could create another layer of bureaucracy at a time when the company is trying to push more than a dozen new products out the door.”

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