Microsoft CEO Steve Ballmer is now running the company’s Windows, Windows Live and Internet properties after Kevin Johnson, the president of the company’s Platforms and Services Division (PSD) and a key player in the failed Microsoft-Yahoo talks, bolted to Jupiter Networks, where he will be CEO.

Microsoft said PSD would be split into two groups, Windows/Windows Live and Online Services, both reporting to Ballmer.

In a prepared statement Ballmer, who wished Johnson well, said the “new structure will give us more agility and focus in two very competitive arenas.”

The Wall Street Journal’s All Things Digital blog recently listed Johnson as a potential replacement for Yahoo CEO Jerry Yang sans Microsoft. He would have run Yahoo if Microsoft had been able to pull off the acquisition.

Microsoft said senior VPs Steven Sinofsky, Jon DeVaan and Bill Veghte would handle the Windows/Windows Live units under Ballmer.

The company will start searching for somebody to run the Online Services business.

Meantime, SVP Satya Nadella will continue to lead Microsoft’s search, MSN and ad platform engineering efforts and SVP Brian McAndrews will continue to lead its Advertiser & Publisher Solutions Group (APS), focusing on display advertising and integrating recent acquisitions such as Massive Inc, Navic Networks, ScreenTonic SA and YaData Ltd.

According to Ballmer, “Our Windows business is firing on all cylinders. We see tremendous opportunity in search and advertising, and we have a clear strategy for investing in success today and growth in the future.”

Unusually Johnson was given space in the press release to say “Microsoft is a special place and presents opportunity to so many. I have been so fortunate to have experienced 16 amazing years of building Microsoft’s business, learning from great leaders in the company and working with phenomenally talented people.”