Xbox 360 exec leaves Microsoft

Peter Moore's resignation unrelated to Xbox 360 hardware snafu, company says

Less than two weeks after Microsoft Corp. announced a $1 billion charge to extend the warranty of failing Xbox 360 consoles, the executive who headed the company's video game business has resigned to take a job with game publisher Electronic Arts Inc. (EA).

Peter Moore, 52, the former president of Microsoft's interactive entertainment business (IEB) group, resigned yesterday, Microsoft announced. Moore, who had joined Microsoft in 2003 after a stint as Sega of America Inc.'s chief executive, will oversee EA's sports games.

Microsoft said that Moore's departure was unrelated to the July 5 announcement of a more than $1 billion charge against earnings to account for an "unacceptable" number of hardware failures of the Xbox 360. The charge will pay for a warranty extension from one year to three years for the console.

"Peter has contributed enormously to the games business since joining Microsoft, and we are sad to see him go," said Robbie Bach, president of the company's entertainment and devices division, and Moore's boss, in a statement yesterday.

Moore said his decision to leave Microsoft was largely driven by a desire to return to San Francisco, where he grew up. "I couldn't be more excited about joining EA and moving my family back to the San Francisco Bay area," Moore said in a statement issued by EA.

"I think you have to take it at face value," said Matt Rosoff, an analyst at Kirkland, Wash.-based Directions on Microsoft. "It looks like this move was in the works for some time."

According to a filing by EA to the U.S. Securities and Exchange Commission (SEC), Moore was offered the new job June 5, a month before Microsoft divulged the high Xbox 360 failure rate. In the offer letter, Moore's $550,000 annual salary was spelled out, as was a $1.5 million signing bonus and an option to buy up to 350,000 shares of EA stock. Microsoft, however, has acknowledged that it knew of the Xbox 360 problems for several months before unveiling the new warranty program and its associated charge.

"I don't think [Moore's resignation] had anything to do with the warranty extension," Rosoff said. "His group didn't have any control over the hardware design of the Xbox 360." Two weeks ago, Bach cited unspecified design, not manufacturing, problems as the root cause of the console failures.

Moore will be replaced by Don Mattrick, 43, a former president at EA who has been working as an adviser to Microsoft for the past several months. "Don is well known and respected throughout the industry for his deep knowledge, technical expertise and management savvy," Bach said.

The executive musical chairs won't affect Microsoft's short-range game strategy, Rosoff said. "With the exception of the warranty problem, I think Microsoft's probably pretty happy with where they are. Their strategy certainly isn't going to change for the fiscal '08 plan," he said.

Although Microsoft said earlier this month that it came up short of its goal for its fiscal 2007 -- which ended June 30 -- to sell 12 million Xbox 360 consoles, Rosoff said the company's video game business is in a "good spot." Much of that optimism, he said, comes from the anticipated release of Halo 3, the next title in Microsoft's flagship game franchise. Halo 3 is scheduled for release in the U.S. on Sept. 25 and in Europe the following day.

"The only time Microsoft's entertainment group has turned a profit is when they've released a Halo," Rosoff said. Microsoft will unveil its fourth-quarter results for fiscal 2007 next Wednesday, when it will also provide an updated forecast for 2008.

This is the second time in as many weeks that Microsoft executives involved with the Xbox 360 made the news. Last week, Bach himself made headlines when SEC filings in May revealed that he had sold $6.15 million worth of Microsoft shares prior to the hardware failure rate announcement.

Copyright © 2007 IDG Communications, Inc.

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