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Analysis: Elop departure leaves big hole at Microsoft

But the company hasn't rushed to fill the position

The departure of Stephen Elop to Nokia leaves Microsoft with a vacancy at the top of one of its largest and most important divisions, but the company doesn't show any signs of rushing to fill the position.

Elop joined Microsoft in late January 2008 and worked alongside the outgoing head of its business division, Jeff Raikes, for about eight months before taking control of the unit. The long transition was planned "to ensure a smooth transfer of his daily responsibilities and management", Microsoft said at the time.

This time around Microsoft won't have the luxury of such forward planning. Elop's departure to take the president and CEO position at Nokia came as a surprise to the industry and Microsoft doesn't have any immediate succession plans in place.

"I am writing to let you know that Stephen Elop has been offered and has accepted the job as CEO of Nokia and will be leaving Microsoft, effective immediately," Microsoft CEO Steve Ballmer wrote in a letter to employees late Thursday.

"Stephen leaves in place a strong business and technical leadership team, including Chris Capossela, Kurt DelBene, Amy Hood and Kirill Tatarinov, all of whom will report to me for the interim."

Several of the division's most important product launches are already behind it, such as the May launch of the mainstay Office 2010 and Sharepoint 2010 packages. Had those been ahead Microsoft might have been more pressed to find a replacement, but the launches went well and business is good, said Ballmer.

"The [Microsoft business division] business continues to grow and thrive, with 15 percent growth in the last quarter," he wrote in the email. "It has been good to see the great response to Office 2010 and SharePoint 2010, the growth of our Dynamics business and the way we have been successful in extending all our [Microsoft business division] products and services to the cloud."

An ongoing focus of the division is the move from the desktop to the cloud, and seamless access to data from PCs, Web browsers and mobile phones. Microsoft is expected to launch its latest mobile phone operating system, Microsoft Windows Phone 7, in the coming months and the product offers integration with Microsoft's business software products.

Microsoft is already working with several handset makers on Windows Phone 7 devices, but Nokia has instead been focused on the Symbian and Meego operating systems that it helped develop.

The departure of Elop to Nokia will undoubtedly raise expectations that Nokia could end up with a Windows Phone 7 device, and Ballmer's closing line in his e-mail to employees could fuel those rumors.

"I appreciate the way that Stephen has been a good steward of the brand and business in his time here, and look forward to continuing to work with him in his new role at Nokia."

But at least one analyst thinks talk of a Windows Phone 7 handset from Nokia is premature.

"I think that's a jump too far. I think it's highly unlikely at this stage. Nokia have set a course to control their own software," said Ben Wood, director of research at CCS Insight.

He noted the two companies already have a close working relationship on the enterprise side, and that Microsoft's focus on consumers with Windows Phone 7 has left a gap in the market for business phones that Nokia has targeted with its Eseries phones.

Microsoft declined to comment further on what Elop's departure means for the company or what plans it has in place to hire a replacement.

(With additional reporting by Peter Sayer in Paris.)

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