In an email to employees this morning, Microsoft has announced that Entertainment and Devices President Robbie Bach and Senior Vice President J Allard will be leaving the company in a shake-up of the division that includes Xbox, Zune, and mobile communications.

Bach will retire in September after 22 years with the company, after delivering a profitable business for Xbox, a product line that once lost millions. J Allard will continue to advise Microsoft CEO Steve Ballmer on incubation efforts, design and UI, and other projects.

The shake-up will not replace Bach, but instead put Don Mattrick, who heads the interactive entertainment business, and Andy Lees, heading mobile communications, reporting directly to Ballmer.  In addition, Windows Live Platform Services Corporate Vice President David Treadwell, a familiar name to LiveSide readers for his work on Live Mesh and the Windows Live platform, will take on a new role in IEB, leading the core technology org.

Kotaku.com has the full email, and TechFlash has more, including an upcoming Q&A with Robbie Bach.