Apple’s iPod Division is undergoing significant changes these days, as Tony Fadell, who was the iPod senior vice president, is turning into Steve Jobs advisor, making room for IBM former exec Mark Papermaster as senior vice president of Devices Hardware Engineering.

The announcement was made amid talks that Papermaster will not be able to occupy his new position due to contractual obligations with IBM, the company’s he’s been working with for the past 26 years. IBM filed a suit in the U.S. District Court in New York last month, seeking to stop Papermaster from taking a job in a rival company (according to the agreement between IBM and Papermaster, the exec is not allowed to work for the competition at least one year after leaving IBM).

Despite the controversy, Apple made the official announcement that Papermaster will join the company to lead the iPod and iPhone engineering team. “Mark is a seasoned leader and is going to be an excellent addition to our senior management team,” Steve Jobs said.

On the other hand, Apple let go of one of its top employees as well, Tony Fadell. Apparently, Fadell and his wife, Danielle Lambert, vice president of Human Resources, “are reducing their roles within their company as they devote more time to their young family.” For Fadell, this means he will remain at Apple as an advisor to Jobs, while his wife will leave the company by the end of the year, after a successor is found.