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Microsoft splits Zune team in two

Software and hardware functions will be separate as company prepares for a day when the Zune service is offered via multiple devices. The move follows layoffs and a rough holiday quarter.

Microsoft has quietly reorganized its Zune team, splitting up the hardware and software teams, CNET News has learned.

Rodriguez Microsoft

The software and services portion of the Zune team--the bulk of its staff--will be added to the portfolio of Enrique Rodriguez, the vice president who currently runs Microsoft's Mediaroom and Media Center TV businesses. The hardware team, meanwhile, will now report to Tom Gibbons, who also leads the hardware design efforts within Microsoft's Windows Mobile unit.

"We're just being very pragmatic and even more so in a world in which not even Microsoft can afford to over-invest," Rodriguez told CNET News.

The move was made on January 22, as Microsoft made its first-ever companywide layoffs--layoffs which also hit the Zune team, although Microsoft won't say how many people were cut. It also follows a holiday quarter in which Zune sales dropped by more than half from a year earlier.

In an hour-long interview on Thursday, Rodriguez said the move was not made in response to recent Zune sales, but rather as the company looks to create a more unified entertainment business and gears up to expand the Zune service to be available on more than just Microsoft's own devices.

"The goal is to make non-gaming entertainment a first-class citizen within Microsoft's business," he said. That means building better software and gaining scale "a little further out than just in Redmond."

"The other thing we are trying to do, like any other business, is to make some money," Rodriguez said.

Rodriguez wasn't ready to offer details on when the Zune service would come, say, to Windows Mobile, but he did say to expect products within this calendar year that take the Zune service beyond just Microsoft's own line of digital music players.

"Zune the service needs to transcend Zune the device," Rodriguez said.

Zune, the device, has faced an uphill battle in its effort to offer a rival to Apple's iPod. Although the company has gained some share, it has come largely at the expense of the companies that were on the market with devices using Microsoft's PlaysForSure software, which predated the Zune.

Microsoft has been saying for some time that it would expand to other "tuners" beyond the Zune player and work on that front predates the latest reorganization. Meanwhile, the company says it is not getting out of the Zune hardware business altogether and in fact new Zune hardware models are expected to come out this fall.

"You have to have a hero device," he said. "If you ask me how important is it from a numbers perspective, today it's ultra-important. If I do my job right, part of my job is to make it less important. Part of my job is to make sure the service comes into every device."

"Zune the service needs to transcend Zune the device."
--Enrique Rodriguez, vice president, Microsoft

But that doesn't mean Rodriguez doesn't see a need for Microsoft to keep making the Zune.

"The reality is that will continue to be the one vertical device that we control every...aspect of it all the way to what it says on the box," he said. "So shame on us if it is not the best."

Rodriguez said that a large part of the reorganization was about bringing more heads together to work on a unified entertainment approach, one that is headed toward a more cloud-based approach.

"To write the type of's a complex job, it's a Microsoft scale job," he said. Microsoft won't say how many people work on Zune now or how large the team was prior to the reorganization, however, Rodriguez said by combining teams, Microsoft has more people focused on entertainment broadly.

"The aggregate of people is more today than it was two weeks ago," Rodriguez said. "We're taking what used to be 300 people there, 300 people there, and 300 people there...into being 1,000 people all around the same vision."