"This is a framework for rapid innovation," said CEO Bill Gates in a conference call to discuss the software company's plans.
Microsoft (MSFT) said that, after the realignment, its business division leaders will "think and act in parallel."
Microsoft shares were up 2 11/16 to an all-time (split adjusted) high of 91 3/4.
"This new structure is part of the reinvention of Microsoft," said President Steve Ballmer.
Ballmer said the reorganization is not a prelude to a break up of the company as part of a settlement of a federal-state antitrust case. Microsoft will meet with government antitrust prosecutors on Tuesday about its settlement offer.
Gates said the company is eager to settle, but won't give up two principles: the integrity of the Windows operating system and Microsoft's ability to innovate and make its products better. The state attorneys general reportedly are seeking the forced licensing of Windows to at least two other companies to break Microsoft's monopoly.
The trial is scheduled to resume in the middle of April.
The reorganization follows closely the plan leaked to the Seattle Times more than two weeks ago.
Under the plan, Microsoft will reorganize into five divisions: Consumer Windows, business and enterprise, business productivity, developers and consumer and electronic commerce.
The new structure parallels what the company considers its core customers: the IT manager, the knowledge worker, the developer and the consumer, Microsoft said.
Senior Vice President Jim Allchin will head the enterprise and Windows divisions, Senior Vice President Bob Muglia will head business productivity, Group Vice President Paul Maritz will lead the developer group and Vice Presidents Brad Chase and Jon DeVaan will head the consumer and e-commerce group.
"Software is going to play a far broader role in our lives than we can imagine today," Ballmer said. "First, we needed to update and refresh our vision. Second, we needed to get closer to our customers' needs and requirements. Third, we needed to empower customer-focused groups to work more autonomously and in parallel."
Written By Janet Haney and Rex Nutting, CBS MarketWatch