MarketWatch First Take: Nadella breaks up Windows and proves it isn’t Bill Gates’s Microsoft anymore

Microsoft Corp. Chief Executive Satya Nadella proved Thursday he is not afraid to wipe away the past and build the company into his vision of a cloud-focused future.

Microsoft unveiled a major reorganization of its businesses around its Azure cloud-computing business and Office software suite Thursday, breaking its legacy Windows business into pieces. Terry Myerson, executive vice president of the Windows and devices group, will leave Microsoft after 21 years, and wrote In a LinkedIn post that it was an “emotional day” that included a last scheduled meeting with co-founder Bill Gates.

Read more about Nadella’s progress in moving Microsoft to the cloud

It is still hard to separate Microsoft from Gates, who remains a “technology adviser” and board member for the company, or its biggest selling product. They were the faces of Microsoft MSFT, +2.10%  when the company made its first huge consumer push with the launch of Windows 95 in the same month that Netscape went public. In the early days of the internet, Gates and Co. paid for the Rolling Stones song, “Start Me Up,” danced awkwardly on stage and hired comedian Jay Leno to make jokes for a huge launch, complete with a carnival atmosphere, on its campus.

Windows became the dominant operating system for the personal computer, but as users have shifted more work to mobile devices and to the cloud, Microsoft has to change. With Nadella at the helm, Microsoft has turned around by focusing on the cloud, and may be heading for a $ 1 trillion market cap with shares gaining 39.4% in the past year as the S&P 500 index SPX, +1.38%  has increased 11.9%.

Nadella made sure to emphasize in a company email that he was not killing off the operating system that will always be associated with Microsoft.

“The future of Windows is bright as we continue to innovate across new scenarios and device form factors, and more deeply connect to our Microsoft 365 offerings,” he said, referring to the company’s cloud-based software offerings. Artificial intelligence and how the physical and virtual worlds collide are also important technologies in his vision of the future.

So far, Nadella’s unrelenting focus on the cloud has helped the company return to the upper echelon of tech giants, even as it has juggled and transformed its legacy software business. That is an accomplishment that other legacy tech companies, like IBM IBM, +0.60% wish they could claim as well, and one that should give investors confidence that Nadella is making the right moves with Windows.

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