Bach, Allard head entertainment and devices unit

Two of the most visible faces in Microsoft’s entertainment and devices division are leaving the company.

Microsoft on Tuesday announced the departures of president Robbie Bach and chief experience officer J. Allard.

Bach is retiring this fall after 22 years with the company. He has headed the entertainment and devices division since its inception five years ago and is a regular presence at major Microsoft press events.

Allard, the driving force behind the Xbox and Zune media player, is leaving but will remain as an adviser to CEO Steve Ballmer.

The pair were the most visible faces on the Xbox team when the system launched in 2001 — and spearheaded the project internally.

Both played key roles in making Microsoft a viable force in the videogame business, wooing developers and persuading consumers (and media) that the company was dedicated in its efforts.

Allard’s departure had been rumored for several days. He has been on sabbatical since Microsoft ceased work on its Courier PC tablet, which Allard was spearheading. Bach, though, had been touted as a possible successor for Ballmer, and his departure shocked the tech world.

“I have worked with Robbie during his entire tenure at Microsoft, and count him as both a friend and a great business partner and leader,” said Ballmer in a staff memo. “Robbie has always had great timing, and is going out on a high note.”

Don Mattrick, who heads the Xbox unit (formally known as Microsoft’s interactive entertainment business) and Andy Lees, head of the division’s mobile arm, will report to Ballmer effective July 1.

The long-term effects of the shake-up on the division are murky at this point. Some feel it’s a sign that Microsoft might be taking a step back from the hardware business. Others feel the new reporting structure for Mattrick and Lees indicates Ballmer wants to personally put the division in order.

The Xbox unit should be the least affected by the move. After losing billions of dollars in its early days, it’s now profitable and is generally viewed as a market leader with a firm lead over Sony’s PlayStation 3 in the gaming space. And the coming launch of a motion sensor device dubbed “Project Natal” is widely expected to give the console another boost.

The mobile unit, however, will be under the microscope. Once a leader in the space, Microsoft has fallen short in recent years. Research firm Gartner notes the Windows Mobile OS market share fell to 6.8% of the market in the first quarter. Last year it was 10.2%. Google’s Android jumped from 1.6% to 9.6% and the iPhone went from 10.5% from 15.4%.

That has reportedly causing some rancor within the company. The coming launch of Windows Mobile 7 is seen as the company’s most aggressive move yet to remain relevant in the mobile market in the coming years.

Future iterations of the Zune portable media device could be in danger, though it’s likely Microsoft will incorporate that software into its mobile technology if it decides to sunset the brand. (The interface for Windows Mobile 7 is virtually identical to that of the Zune HD.)

The shake-up could be just the kick that Microsoft needs. There are frequent reports of divisional infighting at the company. Analysts who follow it have long noted it could benefit from taking some of its successful ideas and spreading them to other departments. Under Ballmer’s direct control, more of that might be about to occur.

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