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Microsoft shares fall after departure of key executive

By Sarah McBride

SAN FRANCISCO (Reuters) - Shares of Microsoft Corp slid on Tuesday after the surprise departure of a key executive, who analysts said marks the loss of the driving force behind the company's biggest product.

The shares were down 2.8 percent in afternoon at $27.21.

Microsoft on Monday night announced the departure of Steve Sinofsky, a 23-year veteran of the company and head of its flagship Windows unit, just two weeks after launching the Windows 8 operating system.

Analysts fear that Chief Executive Steve Ballmer is driving out talent just as the company needs it most.

"Sinofsky may have ruled the kingdom with an iron fist, but he performed amazingly well in rescuing Windows following Vista," Wells Fargo analysts said in a research note on Tuesday, referring to Microsoft's previous operating system. "While we think Windows 8 and Surface have promise, there is still a ton of work ahead to catch iOS and Android."

Apple and Google are seen as holding the lead for systems for mobile computing, a huge growth driver.

Ballmer has replaced the heads of Microsoft's five main operating units in the past four years.

Colin Gillis, an analyst at BGC Financial, said that while he generally has applauded bringing in new blood, "in this case I don't applaud it.

"This is a negative. If I was the CEO, I would have kept him," he added.

Ballmer may have been unhappy with Sinofsky's ability to work with other business units, or the pace of progress under him, analysts said.

Sinofsky's abrasive management style may also have contributed to his departure, analysts said.

Microsoft on Monday named two executives who are relatively unknown outside of technology circles to assume Sinofsky's responsibilities, something that analysts said could also be dragging on the stock. Julie Larson-Green will head the Windows hardware and software division, while Tami Reller will remain chief financial officer of the Windows unit and assume responsibility for the business of Windows.

In a statement issued Monday night, Ballmer said it was "imperative that we continue to drive alignment across all Microsoft teams, and have more integrated and rapid development cycles for our offerings."

(Reporting By Sarah McBride; Editing by Leslie Adler)

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