More and more software is now being delivered over the Internet via browser, rather than installed on individual computers and servers with shrink-wrapped software. Oracle Corp and other Microsoft rivals are "hosting" their own applications and then renting the software to customers. ".net is our most ambitious undertaking since `Internet Strategy Day' in 1995," Ballmer said in a prepared statement. "We have assembled a formidable team of leaders that, with our existing software assets and our commitment to investing significantly in R&D, Strongly positions Microsoft to create valuable services for the PC and a whole new set of connected devices," he said.

The .net group will become part of a newly created consumer division called the personal services and devices group, headed by Rick Belluzzo as vice-president. The division also includes MSN, Microsoft's television service and platform division, the home and retail division and the mobility group. Under that umbrella, Bob Muglia will lead the .net services group as vice President responsible for the development of the software technologies, subscription services and new user interfaces. The .net strategy is intended to integrate Microsoft's software with the Internet and make it easier to swap information between computing devices.

The effort aims to tie together Microsoft's work in areas such as wireless computing, hand-held devices, Internet television and digital media. The strategy's products include computers that recognise voice and can answer back, a digital book and notepad that can recognise natural handwriting and cell phones that let users dictate electronic-mail. Under Muglia, Microsoft named David Cole as senior vice-president to lead the personal services platform division, which will be responsible for building the back-end services that form the infrastructure for the MSN network of Internet services and .net. Brian MacDonald, promoted to senior vice President, will lead the subscription service division, responsible for the development of an Internet subscription service. Kai-Fu Lee, promoted to vice President of the user interface technologies division, will focus on the development of a next generation user interface that incorporates natural language and speech technologies and provides users with greater controlover personal information and preferences, Microsoft said.

"With this new team, we are bringing together the .net Platform, the momentum of MSN, the delivery of personal subscription services, and new devices in a way that will take the Internet and the benefits of technology to a new level for consumers while creating exciting growth opportunities for Microsoft," said Belluzzo. Promotions also went to Jeff Raikes, who will lead the productivity and business services group, and Orlando Ayala, who assumed Raikes' responsibilities as vice President of the South Pacific and Americas region. Jim Allchin will continue to lead the platforms product group, which will now also oversee enterprise server products such as `BizTalk' and `Exchange'. The platforms strategy and developer group will continue to be led by Paul Maritz, Microsoft said.

Microsoft announced staff changes four months ago focused on sales and marketing. Last year, the company implemented an overhaul in structure replacing business units based on products with units focused on customers and competitors. Microsoft shares lost 1-5/8 on Thursday, closing at 72-5/8 on the Nasdaq. The stock has fallen from a year high of 119-15/16, though is up from a year low of 60-3/8.