Author: Joseph Tartakoff

Microsoft’s surprise announcement this morning that Robbie Bach, who had led the company’s entertainment and devices unit since it was started, was retiring and that CEO Steve Ballmer would have more direct oversight of Microsoft’s gaming and mobile properties, has raised lots of speculation about what led to the re-organization. Here are the most important questions we’re tracking, along with some answers:

—Was Bach fired? Microsoft (NSDQ: MSFT) insists Bach was not forced out and instead is retiring; Bach also tells TechFlash in an interview that it’s a “pure coincidence” that he decided to move on at the same time as E&D CTO J Allard. But considering the division’s recent travails and that Ballmer himself will now take direct control over Microsoft’s mobile and gaming efforts, it doesn’t seem too far-fetched to think Ballmer may have pushed Bach out or at least didn’t put up much of a fight when Bach told him he was going to leave. If so, that suggests—ominously—that Ballmer may not have had much confidence in some of E&D’s recent and upcoming product launches, including the Kin phone for teens and the forthcoming Windows Phone 7 operating system.

—Is Ballmer the right person to lead mobile and gaming? GigaOm posed the question earlier today and noted that Ballmer hasn’t exactly been prescient in his predictions about the future of the mobile market (He famously downplayed the iPhone’s prospects). And considering the enormous competitive pressure both Microsoft’s gaming and mobile businesses face, it seemingly would make more sense to have a dedicated leader; i.e. a successor to Bach.

Then again, Ballmer did directly oversee Microsoft’s online services division after Kevin Johnson left two years ago. He later handed the group off to Qi Lu and it’s been in comeback mode since.

—What role did Microsoft’s tablet plans play in the re-org? Also just a “pure coincidence”? A month ago, Microsoft finally confirmed that its E&D unit had in fact been secretly developing a tablet—but also said it was cutting the product. The tablet effort was led by Allard and Ballmer himself is said to have made the decision to kill it. Alley Insider asks whether that move contributed to the decision by both men to leave— an especially reasonable question, considering that Microsoft is looking emptier and emptier by the day in the tablet category.

—What will Allard do for Ballmer? Allard will now serve as an “advisor in a strategic role for Ballmer.” In an e-mail to staff, published by Mary Jo Foley, Allard provides some more color, saying he’ll dedicate about five percent of his overall time “on a couple of projects beginning this fall…” Five percent isn’t a lot (one working day a week) but one possibility could be that Allard will still work on a tablet project of some sort. After all, in announcing its decision to to halt work on Courier, Microsoft said it would be “evaluated for use in future offerings.”

—Who succeeds Ballmer as CEO? Ballmer is only 54 and has the support of chairman Bill Gates, but he has now been Microsoft’s CEO for 10 years and has had a decidedly mixed tenure. Bach had been mentioned as a successor to Ballmer in the past. Bach’s departure would seem to leave chief operating officer Kevin Turner or the widely respected Steven Sinofsky, who leads the company’s Windows division, as the most likely successors. Indeed, there were rumors earlier this year that Sinofsky would be given oversight of Windows Mobile in addition to Windows—something which could still potentially happen.

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Robbie Bach, who has led Microsoft’s entertainment and devices group since it was started five years ago, is stepping down, as is chief technology officer J Allard, as part of a major restructuring of the group, which encompasses the Xbox, Windows Mobile, and the Zune. Bach isn’t being replaced and instead SVP Don Mattrick, who leads Microsoft’s interactive entertainment business, and SVP Andy Lees, who heads up mobile, will report directly to CEO Steve Ballmer.

Microsoft (NSDQ: MSFT) says Bach is retiring and Allard will continue to work as an “advisor” at the company. But it’s hard not to see the departures, especially in light of the decision not to replace Bach, as a sign that Ballmer was frustrated by the performance of the group and wanted to take more control over its operations. Ballmer similarly took direct leadership over the company’s then-faltering online services group after another Microsoft president, Kevin Johnson, left two years ago.

Bach and Allard led the development of the Xbox, which has widely been considered to be a success, but many of the entertainment and devices group’s other products, including the Zune and Windows Mobile, have been lapped by competitors, particularly Apple (NSDQ: AAPL). The division’s financial results have also been mediocre, as it has had to spend heavily on product development. The entertainment and devices group posted operating income for the first time ever only in 2008—although it amounted to a relatively small, by Microsoft standards, $497 million, and operating income fell to $169 million last year.

The timing of the announcement of Bach’s departure is surprising, considering that the entertainment and devices division is on the verge of two major product launches—a new version of its mobile operating system, Windows Phone 7, and ‘Project Natal,’ a system that will let users control the Xbox 360 with just their hands. In a a statement, however, Ballmer cites those forthcoming products as evidence that the group is “set up well for success.” Bach will leave Microsoft this fall

There had been rumors for nearly a month that Allard—who most recently was leading the development of a new tablet computer—was leaving because he was frustrated that the project had been cut. In an interview with TechFlash, however, he denies any connection. TechFlash also has a lengthy interview with Bach, in which he reflects on his time at the company.

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• Microsoft Won’t Make Its Uber-Secret “Courier” Tablet

Google (NSDQ: GOOG) is offering $68.2 million to buy up publicly-traded Global IP Solutions, a San Francisco-based company which sells technology used to deliver voice and video over IP networks. The company describes Google in letter to its clients as being a “valued customer … for many years.” Other customers include include Yahoo (NSDQ: YHOO), which licenses the technology to power voice chat on Yahoo Messenger, as well as Nortel, Samsung and AOL (NYSE: AOL). In a release, Global IP Solutions says it expects to continue to support its current customers but doesn’t offer specific details about where it will fit at Google, saying simply that it will “continue to enhance and extend our products and technology.”

One big hint: Last month, Global IP Solutions said it was introducing new technology that makes it simple for Android developers to integrate video conferencing and chat into their apps.

The deal needs to be approved by the owners of 90 percent of the company’s stock, but the companies say they already have the support of shareholders who own more than 50 percent of Global IP Solutions’ stock, including backer Kistefos Venture Capital. Google is offering a 142 percent premium to Global IP Solutions’ stock price in January, when the company disclosed there had been “strategic interest from a potential buyer” and a 27.5 percent premium to its price last week.

This is the second acquisition in Google’s recent 15 company shopping spree that is related to VOIP. In November, Google bought up VOIP provider Gizmo5 for a reported $30 million in order to improve Google Voice.

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Microsoft (NSDQ: MSFT) is finally confirming that it has been secretly developing a tablet computer of its own—but only in announcing the project’s demise. In a statement provided to Gizmodo, a Microsoft spokesman says that while the tablet—nicknamed “Courier”—will be “evaluated for use in future offerings … we have no plans to build such a device at this time.”

Microsoft isn’t saying why—but the device was slated to come to market by the end of the year at the earliest. Considering that Apple’s iPad has already been a big hit and that there are already so many other tablet-like devices—including Windows-based ones from third-parties—about to go on sale, the company may have thought the market was too crowded for a branded device of its own. Just yesterday, Hewlett Packard (NYSE: HPQ) said that its $1.2 billion purchase of Palm (NSDQ: PALM) would mean it would be bringing Palm’s webOS to slates and tablets in addition to the phone.

Conspiracy theorists (like me!) will also note that the aura surrounding the device already served a very useful purpose for Microsoft, in its attempts to counter iPad buzz. For instance, word of the “Courier” first leaked during the fall— when speculation that some sort of tablet computer from Apple (NSDQ: AAPL) was on the way was at a high point. And, on March 5, when Apple said that iPad sales would begin April 3, new photos of the Courier just coincidentally surfaced on Engadget. Now that the iPad is out and selling well, perhaps Microsoft decided it was no longer worthwhile to keep up the tease.

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Newly independent Rhapsody is giving its iPhone app some bragging rights with an update that lets subscribers listen to tracks even when they’re not online. Users will now be able to download their Rhapsody playlists to their phones; by June, Rhapsody says it will add functionality so users can download individual songs and albums as well.

Rhapsody says the update makes it the “first music service to let people enjoy subscription downloads on their iPhone, iPod or iPad.” But as Rhapsody itself admits in a briefing note provided to reporters its advantage will not last long; the company says that MOG and Spotify have a similar feature in their soon-to-launch apps.

Still, it’s the second aggressive in a month for Rhapsody, which has been losing subscribers. In early April, the company unveiled two new subscription plans—Rhapsody Premier and Rhapsody Premier Plus—that removed any additional costs for mobile streaming.

Rhapsody introduced its iPhone app in September. It’s free to download, although to listen users have to be Rhapsody subscribers. (Rhapsody offers a 14-day trial.) So far, Rhapsody says the app has been downloaded 1.5 million times.

Here’s a demo of the update:

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As if Palm (NSDQ: PALM) needed any more problems … Michael Abbott, its SVP of software and services, has resigned. Abbott had led the “application platform and services development” for Palm’s webOS and was one of nine members of Palm’s management team.

Retention has to be a major concern for Palm, considering that company has seen its new smartphones fail to take off and has reportedly put itself up for sale. And, indeed, in an SEC filing Friday, Palm said it was starting “a retention program for certain key employees” which will provide them equity and cash over two years—as long as they don’t leave.

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Twitter has always been mum on some key stats about its service—like how many people have actually signed up to use it. But at its Chirp conference Wednesday, co-founder Biz Stone finally made public some numbers. He says the site now has 105,779,710 registered users—and is adding 300,000 new users a day. About 60 percent of them are coming from outside the U.S.

Possibly most significantly, Stone says that only a quarter of Twitter’s users access the site via Twitter.com, as opposed to a third-party Twitter client. That matters because so many of the traffic stats that have been released by measurement services have not taken into account outside usage. Stone said Twitter’s own stats come from its internal system (called Bird Brain) as well as Google (NSDQ: GOOG) Analytics. You can watch the conference live here.

Twitter’s purchase of Twitter iPhone client Tweetie last week, along with its launch of a Blackberry app, have raised concerns among developers who believe the company could soon crowd out their own creations. CEO Evan Williams’ response at Twitter’s Chirp conference: “I know this is a controversial decision because there were Twitter apps on these platforms—but when we did the research we found we were really underserving our users.”

Williams proceeded to show a clip of a newcomer to Twitter trying to find a Twitter app on the iPhone (That’s her looking confused in the photo above). “What am I looking for?” she asks, as she goes through several possible Twitter iPhone clients—both free and paid.

“That’s no5 how we’re going to serve users,” Williams said. “We have to make it super easy to get users on board with Twitter and get them engaged.” Williams said that the Blackberry app was responsible for 7 to 8 percent of Twitter’s new sign-ups during the first three days it was available. The more users Twitter has, Williams said, the “more opportunities” there will be for third-party developers.

Will developers buy the pitch? During a short question and answer period following Williams’ remarks, Williams was asked whether the company could make acqusitions “without alienating its developer base.” Williams’ response was meandering, saying he “hopes so” and noting that there will always be some “tension” between a platform provider and the developers who build on that platform.

Williams made one announcement during his keynote, saying that users would now be able to indicate “points of interest” where they are Tweeting from (like a specific museum). He said however that Twitter was not trying to challenge check-in startups like Gowalla and FourSquare, saying instead that he wanted to make those services “work better with Twitter.”

Related

• Twitter Makes First Client Acquisition: Buys Tweetie For iPhone Client; What’s Next?

Taking stock of the iPad’s debut with the help of some metrics being talked about on the web:

»  The lines: “Hundreds” Saturday morning at the Fifth Avenue retail store, which in part led a Needham & Co. analyst to say that sales would top 300,000 for the week-end—and could potentially reach 500,000. Piper Jaffray’s Gene Munster, meanwhile, polled various Apple (NSDQ: AAPL) stores and estimates the company will sell between 600,000 and 700,000 iPads over the same period. By contrast, Apple sold roughly 270,000 iPhones during that device’s first two days on the market in 2007.

»  The apps: On Sunday, there were 3,122 iPad apps in the iTunes store, up from 2,300 when it launched on Thursday. Of these, 80 percent are paid, while 20 percent are free, says TechCrunch, which cites data provided by mobile ad exchange Mobclix. That’s roughly in line with the free/paid break-down when the iTunes app store launched.

As for what’s being downloaded, it’s different than what’s going on the iPhone. There is no overlap between the top 10 most popular paid apps on the iPad and iPhone. Same with free. One possible reason: iPhone apps work on the iPad too and presumably a large percentage of iPad buyers already own iPhones, so they don’t necessarily need to download an iPad version of an app they already have on their iPhone.

»  Popular sentiment: A roughly equal number of negative and positive views about the device on Twitter – with about 130,842 negative sentiments to 126,400 positive ones. Select common positive terms: “Rocks, surfing, tweetie.” The negative: “battery,” “expensive,” “crashes.” Explains TechCrunch: “All of this iPad mania is splitting people into two even camps: either you are one of the few who is lovingly stroking one in your hands right now (or wish you were), or you don’t get what the fuss is all about and just want to stop hearing about the stupid iPad.”

»  The secondary market: Want to make money fast? Apparently there’s demand abroad where the iPad hasn’t gone on sale yet. A 64 gb iPad is going for $745 on eBay (NSDQ: EBAY) right now (early Sunday morning). The list price is $699.00.

Take a look at the just-made-public iPad apps in the iTunes store and what stands out are the prices of many of the apps. Scrabble on the iPad? $9.99 versus $2.99 on the iPhone. Tetris? $7.99 instead of $4.99. Hangman? Yes, Hangman! $4.99.

Sure, app makers can argue that they’re pricing their apps at a premium because they have additional features—but if the history of iPhone app pricing is any guide, prices will start dropping very fast as more apps enter the store—and as app makers battle to get to the top of the best-seller list.

Shortly after the launch of the iTunes App store in July 2008, the average price of a top 100 paid app was more than $4.50. By mid-August, it was down to $4. And by late October—just four months post launch—it was already basically chopped in half, to $2.80, according to a detailed analysis by O’ Reilly Radar. Nowadays, the average price of a top app on the store is $2.43. So, at that rate if you hold out until the end of July, that Flight Control HD app should cost about $3 instead of $4.99.

A couple things to note: iPhone apps will also work on the iPad—and this is a very informal look based off of quick search for “iPad” on the iTunes app store. Things could change by Saturday. Try it out for yourself here.