Microsoft plans gaming shake-up - Report

Microsoft's Entertainment and Devices division is facing a major organisational overhaul in the very near future, The Wall Street Journal reports. The division, which includes the Xbox business unit, accounted for 11 percent of Microsoft's revenue for the first three months of 2010, but competition with both Apple and Google in the mobile space has forced the company's hand, according to the WSJ.

It was reported last week that J Allard, who has overseen all design and engineering across Microsoft's Xbox division, is expected to leave his current roles as chief experience officer and chief technology officer. The WSJ's sources indicate that this is just the start of the changes that could be unveiled as early as next week. The woes in the company's mobile phone division are underlined by the recent market share figures, which show that Microsoft's share of the smartphone market dropped to 6.8 percent in the first quarter of this year from 10.2 percent during the same period last year. During the same time frame, Google and Apple's shares climbed to 9.6 percent and 15.4 percent from 1.6 percent and 10.5 percent, respectively.

The Entertainment and Devices division has now been profitable for two full financial years, with a third full year of profitability expected to be confirmed when Microsoft publishes its annual results in July. Its first full year of profitability was driven by the 2007 launch of Halo 3.

In the first quarter of this year, Microsoft reported $14.5 billion in revenue, a record for the company and a 6 percent year-on-year increase. The Entertainment and Devices division saw its revenues rise 2 percent over the same period, despite nongaming revenues being up 16 percent. Profit at the division was up significantly, however, thanks to decreased Xbox 360 manufacturing costs and increased Xbox Live revenues, with profit rising from $249 million to $851 million.