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Software giant Microsoft Corp. (MSFT - Analyst Report) has announced a complete reorganization of the company. Following the announcement, shares of Microsoft were up almost 2.84% to $35.69.

This reorganization is an attempt by Microsoft to better compete with other technology companies like Apple Inc. (AAPL - Analyst Report) and Google Inc. in the fast-growing mobile and cloud computing markets.

As part of the realignment, Microsoft announced a series of functional and executive changes. The company will be organized around eight functions: engineering (including supply chain and data centers), marketing, business development and evangelism, advanced strategy and research, finance, HR, legal and COO (including field, support, commercial operations and IT).

Additionally, Terry Myerson, who earlier focused only on Windows Phone will now head Microsoft's operating systems engineering group. This group will comprise operating software for all devices ranging from traditional PCs to tablets and gaming consoles.

Julie Larson-Green who was previously the co-chief of the main Windows division will now lead Microsoft's hardware device development, that includes the Surface tablet and Xbox, and the Studios Engineering Group. Craig Mundie, a senior advisor to the CEO, will step down to work on a special project through the rest of the year and Rick Rashid will work in the OS division.

Microsoft will implement the reorganization process through 2013 as it gears up for the release of Windows 8.1,Xbox One and Windows Phone.

Microsoft’s initiative to restructure its business comes in the wake of declining desktop and laptop sales due to strong demand for smartphones and tablets. According to recent reports from research firms Gartner Inc. and International Data Corp (IDC), PC sales fell 11% in the second quarter of 2013 compared to the prior year due to continued migration to tablets and other mobile devices.

Microsoft which has been struggling to compete in a world of mobile devices and generate growth like other tech companies, launched the Surface tablet in 2012. Microsoft’s Surface tablet is still lagging its competitors’ and Windows 8 has met with dissatisfaction from users. Its partnership with Finnish handset major, Nokia is yet to generate expected results, as the latter’s Lumia range of smartphones lack the popularity enjoyed by Apple and Samsung devices.

Also, Microsoft’s revamped mobile OS has been struggling in a very competitive market, dominated by Android and iOS. It is also battling the slump in the PC market caused by the sluggish economy.

Therefore it was important for Microsoft to strategize in order to regain its lost position in PCs and grow in the smartphone segment.

Microsoft has a Zacks Rank #4 (Sell). Another stock in the sector that is performing well currently is Orbitz Worldwide (OWW - Snapshot Report), carrying a Zacks Rank #2 (Buy).

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