Microsoft’s online chief, Yusuf Mehdi, is moving across the Xbox group.

The software giant announced Mehdi’s move in an internal memo earlier this week. Yusuf Mehdi’s move sees him leave the online service division, responsible for products such as Bing. The unprofitable online services division has been haemorging money from Microsoft for years as the company attempts to compete with search giant Google. Mehdi’s move to Xbox will see him lead the marketing of Microsoft’s Xbox business.

Mehdi will report to Don Mattrick, according to GeekWire’s Todd Bishop who obtained an internal memo on his move. His new role will involve Mehdi filling a vacany created by the retirement of Michael Delman, Microsoft’s global marketing chief for the interactive entertainment business. GeekWire posted the full text of the memo:

From: Qi Lu

Sent: Wednesday, November 09, 2011 11:04 AM

Subject: OSD Organizational Announcement

Hi Everyone,

This email is to inform you that Yusuf Mehdi, Chief Audience Officer for OSD, will be moving on to a new and exciting chapter in his career, working for Don Mattrick, President of the Interactive Entertainment Business (IEB), as the Chief Marketing Officer for IEB, effective 12/05/2011.

Yusuf and I have been discussing his career plan for several months, and we both felt with OSD and OABG’s success and momentum, the time is right for Yusuf to take on a new challenge for Microsoft.  With more than ten years of service in Microsoft’s online services businesses, he has been a trusted adviser, a great leader of people, and has helped get us to where we are today in OSD. We are fortunate to have had Yusuf be an important part of OSD for the past ten years, and are equally fortunate that he is staying close, helping IEB continue its great momentum as it becomes a global entertainment brand for Microsoft.

Throughout my tenure at OSD, Yusuf has been a key member of the OSD LT and a trusted partner, from whom I have learned a tremendous amount about marketing, the industry, and Microsoft. I have thoroughly enjoyed working with Yusuf and I am confident he will do an amazing job for Don, and continue to be a great partner to OSD and a great advocate for Bing and MSN.

Yusuf has been involved with leading Microsoft Online Services businesses longer than anyone else on the OSD LT, and has been a pivotal leader at critical milestones of our division’s journey from the early days of MSN, to the original MSN and Live Search products, to the launch of Bing and the consummation of key strategic deals for OSD and MS, including Yahoo!, Facebook, Twitter and Nokia.  Most importantly, he has built a world class marketing, business development, strategy, and product management organization that has made incredible contributions to the success of OSD and Microsoft.  I want to take this opportunity to express my heart-felt thanks to Yusuf for everything he has done for OSD.

I have asked each of Yusuf’s direct reports to step up their contribution to help lead through this transition period.  On an interim basis, all of Yusuf’s directs will now report into me.  I have also asked that Mike Nichols help with coordination of the OABG ROB and represent OABG at the OSD LT level, in addition to maintaining his current responsibilities as GM of Bing Product Management.

Please join me in congratulating Yusuf in his new role, thanking him for his many contributions to Online, and wishing him all the best.

Thanks.

-Qi