An interesting and timely report from Ina Fried over at CNET. I've emphasized a few important bits...

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

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.

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."

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

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.