The return of prodigal Nokia CEO Stephen Elop to Microsoft's executive team as part of the acquisition of Nokia's handset and services unit is raising questions about Elop's role within Microsoft moving forward, both near-term and long-term, as well as how this will affect Microsoft's recent "One Microsoft" management reorganization scheme.

Under the One Microsoft plan, all operating systems were merged into a single Operating Systems group under Terry Myerson. Qi Lu heads up the new Application and Services group (which handles products like Bing, Office, Exchange, SharePoint and Skype) and Satya Nadella runs the Cloud and Enterprise group, overseeing Windows Server and Azure, among other products.

But the person most effected by today's news will be Julie Larson-Green, who was named as lead for the Devices and Studios group as part of the One Microsoft plan. Larson-Green's team was to handle Surface, Xbox, games and entertainment development and production. Now, it seems, Larson-Green may be seeing her role as executive VP getting diminished already.

See also What Microsoft Did And Didn't Buy With Its Nokia Acquisition

The Nuts And Bolts Of Merging

According to a memo from Steve Ballmer to Microsoft employees last night, what Microsoft wants to do with Elop is create an expanded Devices team that will envelop the existing Devices and Studios group and many of the incoming Nokia employees. Elop will report directly to CEO Ballmer.

Larson-Green, for now, will continue to helm the Devices and Studios team pushing out the expected Xbox One and Surface revamp this fall, Ballmer indicated.

"Julie will be joining Stephen’s team once the acquisition closes, and will work with him to shape the new organization," Ballmer continued.

Meanwhile, several key Nokia players will also be reporting to Elop in his new role as head of the Devices group: Jo Harlow will continue to lead the Smart Devices team and Timo Toikkanen, will continue to lead the Mobile Phones team. Stefan Pannenbecker will lead Design.

There are other aspects of Nokia's business that will have to be merged, such as marketing, sales, finance, HR… all of the cogs that help large companies keep on running.

According to the tentative plan outlined by Ballmer, Nokia's sales team will remain intact, but will report to Microsoft COO B. Kevin Turner. Nokia's marketing will be folded into Microsoft's newly integrated global marketing group.

Where things get fuzzy for the integration are in areas of manufacturing and figuring out a unified customer support infrastructure. That will be the big job ahead for Microsoft Corp. VP Tom Gibbons and Nokia EVP, Operations Juha Putkiranta, who will be leading the integration efforts on behalf of their respective companies.

Elop As Future King?

Putting Elop inside Microsoft as a direct report to Ballmer is an interesting move in itself. Since Microsoft is re-tooling itself as a "devices and services" company, it was widely believed that Larson-Green would be one of the lead internal candidates for Ballmer's job as CEO. This made sense from an operational standpoint as well as a professional one, since Larson-Green is regarded as a smart and savvy leader.

That possibility seems very much in doubt now. The wording of the memo from Ballmer seems to indicate that Larson-Green will be reporting to Elop, which would accordingly elevate Elop to the best heir-apparent position within Microsoft for the CEO job.

According to an interview with Ballmer by The Verge, Elop has been up for the Microsoft CEO position as an external candidate. He will continue to be in the running as an internal candidate. 

Given Elop's tenure as former head of Microsoft's Business Division from 2008-2010, he certainly has the background to take on the lead role at Microsoft. But Elop's work to date at Nokia has been less than stellar, even after he chose to enter a strategic partnership with Microsoft in 2011 and sell Windows-based smartphones.

Sure, it makes sense for a company that wants to remodel itself into a devices company to hire someone who's run a devices company already.

But when Elop took over Nokia just shy of three years ago Nokia's global smartphone market share was around 35%. Now, it's around a mere 4%. In 2010, its market cap was over $40 billion. Three years later, Nokia's market cap is $14.6 billion. And since Elop took over, more than 40,000 employees were handed their pink slips in sweeping waves of layoffs.

Is this the kind of management Microsoft really needs?