The plan calls for a reorganization of Microsoft into three large divisions led by individual presidents, each reporting to Steve Ballmer, Microsoft's chief executive.

•  Jeff Raikes will head up the company's Business division, which will house Microsoft's Information Worker group (which includes its Office product line), and its Business Solutions packaged applications group.

•  Kevin Johnson and Jim Allchin will be co-presidents of the Platform Products and Services division, which will comprise Windows Client, Server and Tools and the MSN division. Microsoft said Allchin will hold that new position until he retires, once the company ships Windows Vista at the end of next year.

•  Robbie Bach will be president of the Entertainment and Devices division, which will oversee games and mobile device development.

The huge reorganization is designed to streamline the company's decision-making process and improve product development, Ballmer said in a statement.

In the past several months, some insiders and former employees have said that Microsoft has become too bureaucratic and process-driven to compete with nimbler competitors such as Google.

"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," Ballmer wrote in an e-mail sent to employees on Tuesday.