Microsoft's mobile shakeup: Will it unleash Windows Phone?

Microsoft CEO Steve Ballmer announces major changes in the company's entertainment and mobile device businesses

Microsoft CEO Steve Ballmer Tuesday announced some major changes in the company's entertainment and mobile device businesses. Veteran Robbie Balch, who oversaw a combined group, is retiring and won't be replaced.

A shakeup in Microsoft's gaming and devices business finally splits two groups that should never have been together, and could unleash the company's mobile device efforts. Whether CEO Steve Ballmer's decision is timely or too late remains to be seen.

Microsoft's highest paid senior exec to retire

Ballmer announced Tuesday via a company e-mail that Robbie Balch is retiring. As chief of the company's Entertainment and Devices division, Balch has overseen both Microsoft's Xbox gaming console business and its smartphone and mobile business for the better part of a decade. The group reaped $1.67 billion in sales for the first calendar quarter, about 11% of the company's total revenue for that period, according to the Wall Street Journal.  

Balch won't be replaced. Instead the two executives who head both units will report directly to Ballmer.

For Andrew Lees, chief of Microsoft's Mobile Communications Business (MCB), that clears the decks for him to take whatever steps he wants with respect to the radically redesigned Windows Phone operating system, the most visible of the company's mobile offerings. (On the gaming side, Don Mattrick, who leads the interactive entertainment business, will have a similar opportunity.)

Lees grew Microsoft's server products into a multi-billion-dollar revenue river. In early 2008, Ballmer shifted him to MCB to turn around a failing operation. Microsoft was being outclassed, out-developed and out-marketed by longtime rivals such as Research in Motion, and even worse, by brand-new mobile platforms, first Apple's widely successful iPhone and then Google's Android mobile OS. Its aging Windows Mobile platform was, and is, shrinking in market share.

Taking the helm, Lees recruited a host of new marketing talent from Microsoft's consumer businesses (such as the Zune music player and Windows Media Center). He enticed new engineering talent into the group from elsewhere in the company, including nearly 20% of Microsoft's elite "distinguished engineers." He also drew from outside. One of the outsiders is Albert Shum, a key designers behind the radical revision of the mobile platforms user interface. Shum previously had spent 12 years at Nike in design. (See "From sneakers to smartphones: The man behind Microsoft's Windows Phone design".) 

The new mobile platform has been well received by Microsoft developers, many of whom already possess the experience with Microsoft development tools to begin grappling with Windows Phone applications. It compares very well to the iPhone OS, according to some developers, such as blogger and author Kevin Hoffman, who has experience with both mobile platforms.  

Microsoft worked closely with phone manufacturers and carriers to craft a hardware specification for phones running the new operating system, to ensure that users will get the performance and display needed for a consistently high-quality experience.

The first of these new handsets with Windows Phone 7 is due out perhaps as early as September 2010.

At CES this year, Microsoft's mobile chief, Robbie Bach, echoed those ideas, telling a group of financial analysts, "I am certainly confident that we are going to see [Windows Mobile 7] as something that is differentiated and sets the bar forward, not in an evolutionary way from where we are today, but something that looks, feels and acts and performs completely different."

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