The two leading lights of Microsoft’s Entertainment and Devices division — Robbie Bach and J Allard — are leaving the company, possibly leaving chief executive Steve Ballmer in direct charge of all the company’s fun and games

Robbie Bach is retiring as president of Microsoft’s Entertainment and Devices division, while J Allard is to become a consultant on specific projects. Bach and J Allard are the people mainly responsible for the Xbox games console and Live service, the Zune media player, PC gaming, Microsoft TV, Microsoft Surface, Office for Mac, and Windows Mobile and Windows Phone 7 phones.In the latest financial quarter, the E&D division made an operating profit of $165m on sales worth $1.7bn. The company made $5.2bn on a turnover of $14.5bn.

Bach joined Microsoft in 1988 and often appeared in keynote speeches with Microsoft chief executive Steve Ballmer, who said in a statement: “Robbie’s an amazing business person and close personal friend, which makes his departure a point of sadness for me.” Some had considered Bach a possible future CEO.

Allard, the division’s senior vice president of design and development, is leaving after 19 years at Microsoft. Allard is considered the “father of the Xbox” and his disappearance was noted on 18 May by ZD Net’s Mary Jo Foley, who wrote Where in the world is J Allard? A source told her that “Allard is on sabbatical and is unlikely to return to Microsoft”. However, Allard told TechFlash that his departure was not connected with the cancellation of another of his projects, the dual-screen Courier tablet computer. He said he wanted to devote more time to his personal interests, particularly adventure sports.

Allard was widely admired and the Kotaku games blog has posted a tribute, J Allard, We Will Miss You

Bach is not being replaced, so the mobile phone and Xbox bosses, Andy Lees and Don Mattrick, will report directly to Ballmer. Allard will also report directly to Ballmer on his special projects.

Whatever the reasons for the reorganisation, the division has not generally been successful at selling its major products, or at making money out of them. While Microsoft has done far better than most people expected in establishing the Xbox console line, the Xbox 360 has been dogged by problems with consoles overheating and failing with the famous Red Ring of Death. Microsoft extended the product’s guarantee to cover the issue, taking a $1bn charge for the cost. The division’s successes include the Xbox Live online service and the Halo games franchise.

While Microsoft was relatively quick to enter the smartphone market with touch-screen systems, long before Apple, its Windows Mobile software was clunky by comparison. It has lost market share both to Apple’s iPhone and to systems running Google’s Android software. And while the Zune HD and Zune 4 desktop software have impressed users, the system has not sold well in the US, and has not been launched internationally. It remains to be seen whether the impressive-looking Windows Phone 7 will do any better.

Microsoft has been extremely successful as a platform company, providing software that other companies could use to build their own products, including PCs and phones, applications and both online and offline services. The Entertainment and Devices division embodied Microsoft’s attempt to create proprietary vertically integrated systems including its own hardware, operating system, applications, content and online services. It’s a strategy that Apple has used with tremendous success, but Microsoft has never been able to match it.

Even those who weren’t particularly keen on Bach could struggle to see Ballmer doing the job any better himself. However, since Bach isn’t retiring until the autumn, there’s still time to find a successor.

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Jack Schofield

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After months of rumors, weeks of leaked retail flyers and days of Japanese news, the Xbox 360 price drop is now officially happening in North America. As of 5 September, the 120GB Elite will be $399 (224), the new-ish 60GB 360 — successor to the 20GB Pro — will be $299 (168), and the hard-drive-less Arcade will be $199 (112).

The new price point makes the bottom-end model of Microsoft’s console the cheapest current-generation console on the US market, undercutting the $249 (140) Nintendo Wii by $50 (28).

“I’m not at a point where I can say we’re going to beat Nintendo,” Don Mattrick, senior vice-president of Microsoft’s Interactive Entertainment division, told BusinessWeek. “[But] We will sell more consoles this generation than Sony.” His sentiments were shared by IDC analyst Billy Pidgeon, who told the magazine, “I expect the 360 to remain in second place this generation. But it’s going to be close.”

IDC predicts 2008 will end with the Xbox 360 beating the Sony PlayStation 3 in lifetime-to-date international sales, 27.7 million to 24.2 million, respectively. That feat is made less impressive, though, by the fact the Xbox 360 launched in November 2005 — a year ahead of the PS3, which has been beating the 360 in monthly NPD sales. IDC has both consoles being drubbed by the Wii, which it predicts will have sold a staggering 44.5 million units by year’s end.

Microsoft has not yet announced a price drop for the Xbox 360 in the UK or Europe.

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