Microsoft Implodes Troubled Hardware Unit - InformationWeek

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Microsoft Implodes Troubled Hardware Unit

CEO Steve Ballmer will exert more influence over Entertainment and Devices Division as company veterans Bach and Allard head for the exit.

Microsoft on Tuesday reorganized its flagging hardware unit in the wake of declining sales and some recent product introductions that failed to meet expectations.

Robbie Bach, a 22-year Microsoft veteran, is out as president of the company's Entertainment & Devices Division. Bach, just 48, will "retire" in the fall, Microsoft said. Also gone in the shakeup is J Allard, who was senior VP for Design and Development in EDD.

EDD houses key consumer products like the Xbox, Zune, and Windows Mobile smartphone platform. Significantly, Microsoft did not name a replacement for Bach. Rather, CEO Steve Ballmer appears ready to exert more direct influence over the struggling unit.

Bach's reports—Interactive Entertainment Business senior VP Don Mattrick and Mobile Communications senior VP Andy Lees will now report directly to Ballmer.

"One measure of a leader is the team he assembles around him, and Robbie built an incredible team," said Ballmer, in a statement. "Don and Andy are exactly the right leaders to carry our entertainment and mobility efforts forward," said Ballmer.

The shakeup comes as Microsoft's hardware business is under siege from aggressive competitors and the company's own failure to introduce a mindshare-seizing blockbuster in the manner of, say, Apple's iPhone or iPad.

In the first nine months of Microsoft's 2010 fiscal year, hardware and hardware-related sales were down 5% year-over-year, to $6.5 billion. Xbox and PC game revenue fell 5% during that period, while Windows Mobile and Zune revenue was off 4%.

Most troubling for Ballmer is surely the fact that his company has, amid considerable fanfare, introduced a series of products that turned out to be also-rans or outright flops while rival Apple launches blockbuster after blockbuster including, most recently, the million-unit selling iPad.

An open question is how long Ballmer himself will continue to receive a pass from Microsoft's board and institutional investors.

Typifying Microsoft's hardware troubles is the KIN line of phones—a pair of mobile devices geared toward social networkers that Microsoft introduced last month. "The social generation wants more and needs more from their phone," said Bach, at the time of the launch.

"KIN is the one place to get the stuff you care about to the people you care about most," he added.

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