Robbie Bach in his Microsoft office

Robbie Bach and J Allard, founding fathers of Microsoft's Entertainment & Devices Division, are leaving the company as part of a broader restructuring that will give CEO Steve Ballmer more direct oversight of consumer businesses including Microsoft's struggling mobile unit.

The changes -- a major management reorganization, even by Microsoft's standards -- will reshape the division leading the company's battles against Google, Apple, Sony, Nintendo and other rivals in the hard-fought consumer technology market.

Bach, 48, president of the division since its inception five years ago, isn't slated to be replaced. That will effectively dissolve the division's current structure and leave the existing Xbox and Windows Mobile leaders to report to Ballmer starting in July.

J Allard

Allard, 41, a creative force behind such products as Xbox and Zune, will remain an adviser to the company, working directly with Ballmer. As senior vice president, he doesn't rank as high as Bach in Microsoft's management, but given his longtime role at the company, his departure (rumored since last week) could deliver a blow to Microsoft's attempts to compete with Apple and others in product design and development.

Speaking with TechFlash, Allard said his decision was unrelated to the recent cancelation of the "Courier" dual-screen tablet project that he had championed inside the company. Allard said he doesn't plan to work for Apple, Google or any other Microsoft rivals. After 19 years at the company, he said, he wants to devote more time to his personal interests, particularly adventure sports.

"I'm really going to take a step away and challenge myself on some of these fronts that have just been musings in my head," he said.

Follow-up: J Allard on Microsoft's culture of reinvention

Ballmer announced the changes in an email message to employees this morning. [Follow-up: Read the full text of the memo here.]

"Transitions are always hard. Robbie has been an instrumental part of so many key moments in Microsoft history — from the evolution of Office to the decision to create the first Xbox to pushing the company hard in entertainment overall," the Microsoft CEO wrote. "J as well has had a great impact in the market and on our culture, providing leadership in design, and in creating a passionate and involved Xbox community, and earlier being at the center of our work seizing the importance of the Web for the company."

However, Ballmer added, "both have been great team builders with a strong record of attracting, coaching and growing talent. As a result, their teams are primed to continue to step up and deliver great products, great services and great results for the company."

As part of the management changes, Microsoft said it will shift company veteran David Treadwell to a new position in charge of the core technology group inside the Interactive Entertainment Business, the part of the division that includes the company's Xbox and video games unit. Treadwell has been heavily involved in Microsoft's cloud-computing efforts as its corporate vice president of Live Platform Services.

Allard and Bach have worked together closely over the years, but they both said their decisions to leave were unrelated. Bach, a 22-year Microsoft veteran who ran Office marketing before moving to the company's entertainment business, said it "seemed like the logical time to leave," based on his plans with his family and community organizations, and his confidence in the direction of the businesses he leads.

[Follow-up: TechFlash Q&A with Bach on his departure, his plans, his memories, Xbox, Natal, Windows Mobile and, yes, Microsoft Courier.

Microsoft is describing Bach's departure as a retirement. He said the decision was his own, and he wasn't encouraged to leave. He'll remain at Microsoft through the fall, to ensure a smooth transition.

The Entertainment & Devices Division has posted operating profits in the company's most recent two fiscal years, and it's on track for another profitable year, rebounding from the billions of dollars in losses it posted as the Xbox business was getting up to speed. The Xbox 360 console and Xbox Live online service have given the company a significant presence in the living room, competing against industry veterans Nintendo and Sony.

However, the company's mobile software business has been losing steam, opening the door for Apple and Google to emerge as industry leaders with the iPhone and Android. Microsoft's U.S. market share fell 4 percentage points, to 15.7 percent, in the most recent numbers from the comScore Networks research firm.

"It's one of those funny things where it depends on what metric you look at," Bach said when asked about that trend. "If you just were to look at just market share, you'd say, hey, we still have some challenges. When you look at what I see in the products going forward, the engagement we're getting from (phone makers), the engagement we're getting from operators, I have real optimism and think the business is in a very good space."

The separation of the Windows Mobile unit from the current Entertainment & Devices reporting structure also reflects the company's efforts to connect its mobile initiatives with a wider range of products, including its online services and traditional software.

Don Mattrick, the senior vice president in charge of Microsoft's Interactive Entertainment Business, will report directly to Ballmer as part of the management changes, as will Andy Lees, the senior vice president who leads the Mobile Communications Business.

Microsoft would have four divisional presidents after Bach's departure: Qi Lu, president of the Online Services Division; Stephen Elop, president of the Microsoft Business Division; Stephen Sinofsky, president of Windows and Windows Live; and Bob Muglia, president of the Server & Tools Division.