Where else would Elop go in Microsoft? They bought Nokia devices, they may as well put him in charge of the division that includes what was Nokia's hardware. Nadella has said Xbox is essential to the company and he is the new CEO. The board has also said that Xbox will not be sold off.
Microsoft is actually doing ok with the Xbox now. It bled money for a while, but it's stable right now. There really is no reason to sell it at this point. The company has piles of money. The Xbox One has sold about 4 million vs. PS4's 5.5 million in about three months. That's not great, but it's hardly a failure considering that they are going to have a giant push for Titanfall next month. Microsoft wrote down a billion dollars for Surface and yet they released new models last fall and are coming out with an LTE version in a few weeks. They have money to burn and they love the Xbox. It's not going anywhere.
Basically, Microsoft got reorged. Larson-Green was previously with Sinofsky with Office and Windows and after the reorg, she was put in charge of Devices and Studios. Microsoft buys Nokia, says Elop will be put in charge of the division that Nokia will be a part of, Devices and Studios. My guess is that Larson-Green was meant to be temporary until Elop came in with Nokia and she was supposed to report to Elop. She hasn't done anything with devices in the past so her original placement was more strange than the role she'll be getting now. I'm actually surprised she's still at Microsoft considering Microsoft has cleared out most of Sinofsky's team.
Here's what the press report (
http://press.nokia.com/2013/09/03/n...oft-in-eur-5-44-billion-all-cash-transaction/ ) said when Microsoft announced it was buying Nokia back in September: "Stephen Elop will step aside as President and CEO of Nokia Corporation, resign from the Board of Directors, and will become Executive Vice President, Devices & Services." This was planned since September (and maybe even earlier) before the Xbox One came out.