Platforms and Services president Kevin Johnson will be leaving the company to take over as chief executive of Juniper Networks.
In his place, Microsoft will be naming new executives to head up a split Platforms and Services group.
Senior vice presidents Steven Sinofsky, Jon DeVaan and Bill Veghte will share duties in running a combined Windows/Windows Live group.
The three will report directly to Steve Ballmer and oversee both the Windows Live service and Windows itself.
The rest of Microsoft's web-based operations will be spun off into the Online Services Business, which will be in charge of the companies search, advertising and MSN businesses.
Senior vice president Satya Nadella will take over the business temporarily, but the company is looking to find a long-term replacement.
"Our Windows business is firing on all cylinders," Ballmer declared. "We see tremendous opportunity in search and advertising, and we have a clear strategy for investing in success today and growth in the future."
The two new branches will attempt to move on with Microsoft's online business in the aftermath of the company's failed bid for Yahoo.
Microsoft spent the better part of five months in pursuit of the stumbling internet giant, but Yahoo's recent reconciliation with investor Carl Icahn has casts doubts on any possible deal with Microsoft in the near term.
Johnson, meanwhile, will take over as chief executive of Juniper Networks after 16 years at Microsoft.
"Juniper is a company with a clear technology agenda, great talent and an amazing growth opportunity in a growing industry," he said.
"I am looking forward to bringing my experiences to help Juniper scale and deliver great value to customers, partners, employees and shareholders."
Microsoft shakes up online operation
By Shaun Nichols on Jul 28, 2008 9:27AM