Shakeup Bodes Ill For Windows Phone 7

Hoo boy. For every step forward lately, Microsoft is taking two steps back. Windows 7 has been a great success to the company's bottom line and reputation, but the implosion at the Entertainment and Devices Division (E&DD) is bringing the company back into negative-karma territory.

Let's face it, though, E&DD could use a hard slap in the face to wake it from its stupor. It took most of the past decade and $8 billion to squeak XBox marginally into the black. Zune never made a dent in the iPod's dominance. Microsoft's trendy-wannabe Kin phones landed with a thud. The buzz-generating Courier tablet project was killed, supposedly over the objections of the now-departing J Allard. Hewlett Packard decides to buy Palm and use the PalmOS for its tablets, rather than a Microsoft product.

Whether any of those projects could have been done better is all water under the bridge. Microsoft can only hope that some lessons were learned. They need to learn those lessons in order to improve an even more strategic product arriving by the end of the year: Windows Phone 7.

There are some hopeful signs. The reorganization separates the mobile business from the rest of Eⅅ that makes some sense given that Microsoft's primary mobile customers (at least the current ones) are businesses, whereas most of the other components are consumer-focused. Yet Microsoft is falling behind its competitors. Apple is soon revealing its next-generation phone, and Google's Android OS is now on dozens of devices using many different carriers. By the time Windows Phone 7 arrives, those two will be even more entrenched and further along.

Perhaps the most ominous angle of this reorganization is that Steve Ballmer will be personally overseeing ED&D. Ballmer's leadership hasn't driven Microsoft to excellence over the past decade. If he's taking a more active role in Windows Phone 7, perhaps this will be his final sink-or-swim moment.