The company's move comes as traditional computers are increasingly taking a backseat to mobile devices, and the applications that support them. Sales of personal computers — Microsoft's traditional strength for products like Windows and Office — have slumped to historical lows in the broad move toward gadgets that enhance productivity and provide entertainment.
As consumers migrate to tablets and smartphones, Microsoft has struggled to keep pace with the other top dogs in the technology sector like Google and Apple, and lacks a coherent mobile strategy.
Google's Android software — run on Samsung's wildly popular Galaxy phones — and Apple's iOS for iPhone take up an estimated 92 percent of the market. That has left little room for Microsoft's Windows smartphone to chip away at their dominance.
Microsoft's restructuring centers around beefing up strategy dedicated primarily to operating systems, applications, cloud computing and devices. According to a communique, the new reorganization gives Microsoft's advertising, marketing and media apparatus more authority.
As part of its push into the brave new world of mobile, the company named Julie Larson-Green as head of devices and studios engineering group, overseeing areas such as hardware development, games, music and entertainment. Terry Myerson will head up Microsoft's operating systems and engineering group, which includes Windows.
The reorganization process is expected to be completed by the end of the calendar year as Microsoft aims to "figure things out," the company said.
In a release, CEO Steve Ballmer said the realignment would make Microsoft "innovate with greater speed, efficiency and capability in a fast-changing world," while helping the company "execute even better" in creating devices and services.
The full text of the announcement can be found here.
—The Associated Press contributed to this article.