NEW YORK (CNN/Money) – Ed Fries, the head of Microsoft's games division, has resigned from the company, catching employees and industry observers by surprise.

Fries resignation was announced Tuesday in an e-mail from Robbie Bach, senior vice president of Microsoft Games. In that note to the staff, Bach added that the company was planning no other organizational changes at this time.

Fries

"Although we will definitely miss Ed, he leaves Microsoft Games on a solid path with great strategy. Everyone must stay focused and keep moving forward," wrote Bach. "We hope Ed takes this opportunity to sit back, relax and allow himself a moment to enjoy the contributions he has made to the company and the industry."

Fries decision to leave comes as Microsoft prepares to unveil details about the next Xbox console.

"We're kind of at the point in the project that you have to decide 'are you going to sign up for another five years for the next version or not'," he said. "That's just the natural point to look back at it and ask 'Is this what I want to do? Is everything how I want it to be?'"

The departure comes after months of discussions between Fries and Bach. Fries said the company offered to change his job responsibilities in order to convince him to stay, but the two parties could not reach an agreement.

"For me, I'm looking for a situation where I have a lot of freedom around the development of our products and the way those products come to market," he said. "I've had some of that to date, but not as much as I would like."

Fries was a key component of Microsoft's (MSFT: Research, Estimates) success in the gaming industry. An 18 year veteran of Microsoft, he took over the fledgling games division in 1995. At that time, Microsoft Games consisted of little more than the company's popular Flight Simulator program for the PC. In subsequent years, he was actively involved in the development and launch of the Xbox gaming system and oversaw the acquisition of several major game developers, including Bungie Software (which is responsible for "Halo", the Xbox's most successful title) and Rare.

Eight years later after he took the reins, the games division consists of 14 separate studios and has anywhere from 60 to 70 games in production at any given time.

Shane Kim, chief operating officer for Microsoft Games, will replace Fries on an interim basis.

Fries said he plans to remain in the gaming industry, but is not revealing his plans at this time. He added he leaves Microsoft with no ill will.

"I'm very grateful to everything Microsoft has done for me," he said. "I've had the incredible opportunity to work with amazing people and work on amazing projects. ... The closest thing I can relate this to is graduation. It's exciting to go on to something new but it's sad to leave at the same time."