Kevin Johnson, the Microsoft head of online services is leaving the company, and Microsoft is splitting up the Platforms and Services division, he led, into the Windows/Windows Live group and an Online Services group.

Both organisations will report directly to CEO Steve Ballmer.

Johnson’s departure, to become chief executive of Juniper Networks, was announced a week after Microsoft released financial earnings that were dragged down by its online services group.

Johnson has been with Microsoft since 1992. "In some ways, he has had a career trajectory somewhat like Steve Ballmer's own. He was definitely on the short list of people who would be a potential CEO replacement," said Rob Helm, an analyst with Directions on Microsoft.

Yet, he was in a difficult position as head of the online group. “In the end he was responsible for the online strategy, which is by far the weakest part of Microsoft’s business,” Helm said.

Johnson hasn’t managed to improve market share or revenue shortfalls through organic growth or acquisition, Helm noted. “And spending on that business has been tremendous enough to weigh on the company’s results. I don’t know if he jumped or was pushed, but there’s no question he had a difficult job and he may not be the last manager to fall on this particular sword.”

The Microsoft online services business reported a US$488 million loss in operating income for its fourth quarter, more than double the $210 million operating loss the division saw last year.

In addition, Johnson was a driving force behind the Microsoft attempt to acquire all or part of search rival Yahoo, which has so far failed.

However, he was also in charge of the Windows operation at Microsoft, one of the company's most profitable products.

His departure is a blow for Microsoft, said Greg Sterling, an analyst with Sterling Market Intelligence. "This is a bit of a surprise," he said. "He was a very strong and central figure in the company." Sterling speculated that Johnson may have been frustrated by his company's failure to close the Yahoo deal.

The Wall Street Journal reported that Johnson planned to take a position with Juniper Networks. Juniper spokeswoman Sarah Sorensen would not confirm the report, saying the company does not comment on "rumours and speculation." Microsoft did not say where Johnson would go.

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