A little more than three years after opening Pioneer Studios, a skunkworks operation to develop consumer electronics and experiences, Microsoft has closed the unit, CNET has learned.

Pioneer was the brainchild of J Allard, the executive behind the original Xbox launch and chief technology officer of the company's Entertainment and Device division before leaving the company a year ago. A Microsoft spokeswomen confirmed that Pioneer no longer occupies its sleek design office near downtown Seattle, and that many of the Pioneer employees have moved to other Microsoft businesses. Others have left the company.

Though Microsoft made little noise about Pioneer, it was once at the heart of the company's efforts to capture consumer imagination. Rather than having a portfolio of products to develop, Pioneer sought to incubate design that might one day make its way into products. The ill-fated Courier tablet--something of a dual-screen tablet that predated Apple's iPad--emerged from Pioneer. Though the device won kudos when images leaked, Microsoft decided to shelve the concept.

Pioneer Studios

Pioneer also worked on pieces of Windows Phone 7, Xbox, and Zune, as well as the failed Kin mobile phone, a device that lasted on the market for less than two months.

In a video from last October on Microsoft's developer Web site, Pioneer's co-founder Georg Petschnigg says the unit's mission is to develop new consumer experiences for Microsoft. "Our job is to incubate those and work with the product teams to bring them to market," Petschnigg says.

In a separate video, Petschnigg said because of Microsoft's size, the group zeroed in on opportunities that offered revenue opportunities north of $100 million a year. And because the group focused on those opportunities so early, it had a 20 percent success rate. "Often times our work just doesn't go anywhere. That's one of the perils of being an entrepreneur," Petschnigg says.

The idea behind Pioneer was to breathe a culture of innovation into the all-too-often stolid company. As it's grown, Microsoft has become increasingly bureaucratic, a place where creativity could often be crushed under a mountain of meetings and dependencies on other Microsoft products.

That's one reason why Pioneer opened in Seattle's Pioneer Square, a creative hub at the southern edge of downtown and some 16 miles from Microsoft's Redmond, Wash., headquarters. The company hired SkB Architects to design the 36,000-square foot space and spared little expense. The location offered huge open spaces, dotted with cushy Eames lounge chairs, angular white desks, blond wood floors, and exposed brick walls.

Pioneer Studios

More than just having a design studio feel to it, Microsoft populated Pioneer with top designers, both from within the company and new hires from companies such as Nike and Ziba Design, a leading industrial design firm in Portland, Ore. The space was big enough to fit 120 employees.

Pioneer's days may have been numbered when Allard left Microsoft last year. Allard frequently challenged status quo at Microsoft, pushing the company to experiment with alternative approaches to products, services, and even corporate culture. He led the charge to insure that the original Xbox didn't run on the Windows operating system, something Microsoft's top brass initially wanted.