UPDATE 1-Microsoft to shake up phone, Xbox unit-WSJ

* Report says software giant to overhaul device unit

* Chief tech officer Allard said to go-WSJ

* Shake-up comes as unit struggles in mobile

(Changes dateline; adds background on unit, executives)

SEATTLE, May 24 (BestGrowthStock) – Microsoft Corp (MSFT.O: ) is set
to overhaul management of its division focused on mobile phones,
videogames and other consumer devices, the Wall Street Journal
said on Monday, citing people familiar with the matter.

The world’s largest software maker, which has been brushed
aside by Apple Inc (Read more about Apple stock future.)’s (AAPL.O: ) iPhone and Google Inc (Read more about Google Stock Analysis)’s (GOOG.O: )
Android operating system in the fast-growing smartphone market,
may announce the changes at its entertainment and devices
division as early as this week, the Journal reported.

Microsoft declined comment.

J. Allard, the unit’s chief technology officer — a 15-year
Microsoft veteran who led the development of the Xbox game
system and Zune music player — is expected to leave following
Microsoft’s recent decision to shelve an experimental tablet
computer called the Courier, which Allard was spearheading, the
Journal reported.

The reorganization will be broader than Allard’s departure,
the Journal said, without giving details.

That could mean a change of role for Robbie Bach, who has
led the entertainment and devices unit since its creation in
2005. Bach, a 22-year Microsoft veteran, was responsible for the
original launch of Xbox in 2001.

A management shake-up would come just before Microsoft
unveils its new hands-free system for the Xbox — code-named
Natal — at the E3 gaming conference in mid-June.

Entertainment and devices is the fourth biggest of
Microsoft’s five operating units — behind its Windows, Office
and server units — and is on track to post more than $8 billion
in revenue this fiscal year, which ends June 30.

Last quarter, it contributed 11 percent of Microsoft’s
overall sales and 3 percent of its operating profit.

The unit developed the highly successful Xbox game system,
but has so far failed to make an impact with its Zune digital
music player and is losing ground in mobile and smartphones.

Only about 10 percent of smartphones sold in the first three
months of this year in the United States run Windows software,
according to retail research firm NPD Group. That is well behind
Apple with 21 percent, Google with 28 percent and
BlackBerry-maker Research in Motion Ltd (RIM.TO: ) with 36

Worldwide, Google’s Android passed Microsoft’s Windows as
the fourth most popular smartphone operating system in the first
quarter, according to research firm Gartner, behind Apple, RIM
and Nokia’s (NOK1V.HE: ) Symbian system.

Recognizing its problems, Microsoft announced a completely
new software system for phones earlier this year, called Windows
Phone 7, which is scheduled to hit the market in a new range of
handsets for this year’s holiday shopping season.

Microsoft needs to regain momentum in the mobile computing
sector as Apple’s iPad and a host of competing slate or tablet
devices are poised to reshape the software industry.

The company may have lost an important ally in the emerging
tablet market with Hewlett-Packard Co’s (HPQ.N: ) recent deal to
buy smartphone pioneer Palm Inc (PALM.O: ), signaling that HP is
planning to use Palm’s operating system instead of Microsoft’s
Windows in its forthcoming slate devices.

Stock Today

(Reporting by Bill Rigby and Ilaina Jonas; Editing by Gary Hill
and Jon Loades-Carter)

UPDATE 1-Microsoft to shake up phone, Xbox unit-WSJ