Microsoft Corp is set to overhaul management of its division focused on mobile phones, videogames and other consumer devices, the Wall Street Journal said on Monday, citing people familiar with the matter.

The world's largest software maker, which has been brushed aside by Apple Inc's iPhone and Google Inc's Android operating system in the fast-growing smartphone market, may announce the changes at its entertainment and devices division as early as this week, the Journal reported.

Microsoft declined comment.

J. Allard, the unit's chief technology officer -- a 15-year Microsoft veteran who led the development of the Xbox game system and Zune music player -- is expected to leave following Microsoft's recent decision to shelve an experimental tablet computer called the Courier, which Allard was spearheading, the Journal reported.

The reorganization will be broader than Allard's departure, the Journal said, without giving details.

That could mean a change of role for Robbie Bach, who has led the entertainment and devices unit since its creation in 2005. Bach, a 22-year Microsoft veteran, was responsible for the original launch of Xbox in 2001.

A management shake-up would come just before Microsoft unveils its new hands-free system for the Xbox -- code-named Natal -- at the E3 gaming conference in mid-June.

Entertainment and devices is the fourth biggest of Microsoft's five operating units -- behind its Windows, Office and server units -- and is on track to post more than $8 billion in revenue this fiscal year, which ends June 30.

Last quarter, it contributed 11 percent of Microsoft's overall sales and 3 percent of its operating profit.

The unit developed the highly successful Xbox game system, but has so far failed to make an impact with its Zune digital music player and is losing ground in mobile and smartphones.

Only about 10 percent of smartphones sold in the first three months of this year in the United States run Windows software, according to retail research firm NPD Group. That is well behind Apple with 21 percent, Google with 28 percent and BlackBerry-maker Research in Motion Ltd with 36 percent.

Worldwide, Google's Android passed Microsoft's Windows as the fourth most popular smartphone operating system in the first quarter, according to research firm Gartner, behind Apple, RIM and Nokia's Symbian system.

Recognizing its problems, Microsoft announced a completely new software system for phones earlier this year, called Windows Phone 7, which is scheduled to hit the market in a new range of handsets for this year's holiday shopping season.

Microsoft needs to regain momentum in the mobile computing sector as Apple's iPad and a host of competing slate or tablet devices are poised to reshape the software industry.

The company may have lost an important ally in the emerging tablet market with Hewlett-Packard Co's recent deal to buy smartphone pioneer Palm Inc, signaling that HP is planning to use Palm's operating system instead of Microsoft's Windows in its forthcoming slate devices.

(Reporting by Bill Rigby and Ilaina Jonas; Editing by Gary Hill and Jon Loades-Carter)

Iphone Microsoft Apple inc. Electronics