Update: Two departures shake up Microsoft's entertainment group

IDG News Service - Two longtime Microsoft Entertainment and Devices division executives are leaving the company in a move that will give CEO Steve Ballmer more control over the group.

Robbie Bach, president of the Entertainment and Devices division, will retire later this year after 22 years at Microsoft. He won't be replaced. Instead, the heads of the mobile communications business and the interactive entertainment business -- both parts of the division -- will report directly to Ballmer starting July 1. The division is responsible for Microsoft consumer products including Windows Phone 7, Xbox, Zune and Project Natal, the company's newest gaming offering.

The timing of such a high-level departure is unusual, indicating that leaders may not have been happy with the division's performance, said Matt Rosoff, an analyst with Directions on Microsoft.

"I would have thought that if Microsoft was going to shake up the division, it would have at least given the current product lineup a chance to succeed or fail," he said. Windows Phone 7 and the Kin phones have only just launched and Natal is slated to come out later this year.

"It's possible that senior leadership was not happy with some of the performance in that area, particularly mobile," he said.

While Windows Phone 7 is a step in the right direction, the Windows Mobile platform has been steadily losing market share even as the rest of the smartphone industry booms. Kin has not been enthusiastically received.

In addition, Microsoft's mobile efforts aren't keeping pace with other new trends. "HP's purchase of Palm sort of signals a shift in the market," Rosoff noted. That deal was an indication that HP would rather buy a mobile OS and repurpose it for a slate computer rather than use Windows, he said. Also, Android is being fit onto slate computers. As a result, Microsoft may now want to leverage its mobile platform for slate computers before those mobile OSes cut into Windows sales, he said.

"A shake-up at the top usually suggests that all is not well at the business," he said.

Still, he said it's possible that Bach wanted to leave and decided to do so now before becoming involved with the next generation of product development.

In a statement, Bach said that he plans to spend more time with his family and his nonprofit work with the Boys & Girls Clubs of America.

Ballmer, in a statement, called Bach a close personal friend and said he was sad to see him go.

Bach will work with Ballmer and other leaders to ensure a smooth transition and is planning to leave the company in the fall, late in the third quarter or early in the fourth.