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Apple's success forces Microsoft to 'shake up' phone, media teams

In the face of success from Apple and Google in the portable device market, Microsoft is expected to announce "major organizational changes" in the company's Entertainment and Devices Division, responsible for Windows Phone, Zune and Xbox.

The first signs of major changes at Microsoft came last week, when Mary Jo Foley of ZDNet reported that J Allard, chief experience officer and chief technology officer of the Entertainment and Devices Division, was leaving the company. Allard's alleged dissatisfaction is believed to stem from Microsoft's canning of the dual-screen Courier tablet — a secret project that he was head of.

This week, The Wall Street Journal also reported that Allard is expected to leave his position at Microsoft following the canceling of the Courier. But the changes go well beyond Allard, as reporter Nick Wingfield said that the entertainment and devices group — which brought in $1.67 billion in sales in the first quarter of 2010 — is expected to undergo a "shake up" from the Redmond, Wash., software giant. The changes, the report said, come "in the wake of increasingly bruising competition from Apple Inc. and Google Inc. in the market for consumer devices."

The forthcoming "major organization changes" will have an effect on the Windows Phone team, responsible for the new multitouch Windows Phone 7 mobile operating system set to launch this fall. Microsoft's presence in the smartphone business has become increasingly smaller as sales of Apple's iPhone and devices running the Google Android mobile operating system have grown.

"Microsoft's woes in mobile phones are particularly troubling for the company," Wingfield wrote. "Although it was an early player in the market for sophisticated wireless phones known as smartphones, Microsoft has stumbled badly in recent years with its Windows Mobile operating system for handsets."

Microsoft's Entertainment and Devices Division is also responsible for the Zune line of portable media players, most recently updated with the touchscreen Zune HD last September. Though the latest Zune received mostly positive reviews, it failed to counter Apple's iPod touch, which has seen tremendous sales growth even as the market for dedicated media players becomes cannibalized by multifunction devices like the iPhone.