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6/16/2006 12:44:36 AM
Bill Gates to Cede Software Reins in Era Change REDMOND, Wash., June 15 — Three decades after he started Microsoft with the dream of placing a personal computer in every home and business, Bill Gates said Thursday that he would leave his day-to-day role there in two years.
He will shift his energies to the Bill and Melinda Gates Foundation, which his Microsoft fortune has made the world's largest philanthropic organization, dedicated to health and education issues, especially in poor nations.
At a news conference after the close of the stock market, Mr. Gates, 50, said he was not leaving Microsoft altogether. He said he planned to remain as chairman and maintain his large holding in the company.
"I always see myself as being the largest shareholder in Microsoft," Mr. Gates said.
But the move, analysts said, points to the changes sweeping the software industry. Probably more than any other person, Mr. Gates has been identified with personal computer software, while the center of gravity in computing is increasingly shifting to the Internet.
"I think we'll look back at this day as the separation between two eras in software — the first being software in a box, and the second software distributed over the Internet for free and funded by advertising," said George F. Colony, chief executive of Forrester Research. "The new era requires a complete re-examination of Microsoft's business model, which has been one of most profitable the world has ever seen."
Mr. Gates's college classmate and business partner of 26 years, Steven A. Ballmer, also 50, will remain chief executive of the company. He assumed that post in 2000, with Mr. Gates remaining engaged in the daily operation with the title of chief software architect.
Mr. Ballmer emphasized in an interview that Mr. Gates would give the preponderance of his time to Microsoft during the two-year transition.
But the transition will begin immediately, Mr. Gates said, with his role as chief software architect taken over by Ray Ozzie, 50, one of the company's three chief technical officers. Mr. Ozzie, whose software background includes the conception of Lotus Notes in the 1980's, joined Microsoft last year and has been leading its strategic response to the growing Internet challenge the software company faces from companies like Google and Yahoo.
Mr. Gates said that he and Mr. Ballmer had begun discussing a transition some time ago, but that a decision had been made only in the last few weeks. He noted that he had deferred telling Mr. Ballmer of his decision several times, and that his wife, Melinda, a former Microsoft product manager, had reminded him to communicate with his business partner on several occasions.
"I talked with her even before I talked to Steve about this possibility," Mr. Gates said. "I got her advice. For a couple of weeks she said, 'Have you mentioned it to Steve yet?' I said, 'No, it wasn't easy to bring up today, maybe I'll bring it up tomorrow.' "
He said his primary motivation was a desire to spend more time on the issues that he has decided to attack with his foundation, whose resources will continue to swell as Mr. Gates makes good on his commitment to shift most of his fortune, said to be around $50 billion. He remains the largest single shareholder in Microsoft, with 9.6 percent of the stock, a stake currently worth $21.6 billion.
But his decision to begin scaling back at Microsoft comes at a critical juncture for the company, a dominant force in the computing world for a quarter-century. Although revenues are at record levels and the company's profits are running at a stunning $1 billion a month, Wall Street has grown increasingly critical of Microsoft's inability to make significant headway in new markets as diverse as video games, Internet television and Web advertising.
The company's stock has fallen from a high of $28.38 in the last year to close at $22.07 on Thursday. The share price peaked at $58.89 in December 1999. The Gates announcement sent the share price down slightly in after-hours trading.
At the news conference, Mr. Gates spoke about his emotional commitment to the company that he created with Paul G. Allen in New Mexico in 1975, initially selling software stored as punched holes in paper tape to the first generation of personal computer hobbyists.
Microsoft became a dominant force in computing shortly after I.B.M. picked the company, by then based in Bellevue, Wash., to provide the principal operating system for the I.B.M. PC in 1981. In the next decade Mr. Gates, aided by Mr. Ballmer, built a software monopoly by adding a growing array of programs bundled together into a single product called Office.
"When Paul Allen and I started this 30 years ago, we had big dreams about software," Mr. Gates said Thursday at the news conference, held in a television studio on the company's corporate campus here. "I have no doubt that over the next 30 years that Microsoft will play just as important a role as it has over the last 30 years."
Even Mr. Gates's competitors described his role as pivotal in shaping the PC era and transforming modern computing.
"Bill Gates redefined the software industry and redefined the computer industry," said Rob Glaser, a former Microsoft executive who is now a competitor at RealNetworks, a Seattle-based Internet services company. "His retirement from a full-time role is a huge milestone, and it marks the end of this era."
Still to be determined is how quickly Mr. Gates will depart the computer industry stage. As the chairman, he will remain the face of Microsoft to the outside world, giving speeches and visiting customers.
"And he'll still be involved in all the large business decisions," said David B. Yoffie, a professor at the Harvard Business School. "So the structure will change, but whether the outcomes will be different remains to be seen."
As part of the realignment, the company elevated a second chief technical officer, Craig J. Mundie, 56, who will be given the title of chief research and strategy officer. Working with Mr. Gates during the transition, he will take over responsibility for the company's research and product development efforts.
Since both Mr. Mundie and Mr. Ozzie are contemporaries of Mr. Ballmer and Mr. Gates, analysts did not see the moves as designating a future chief executive.
The shift follows a September 2005 change in which Mr. Ballmer reorganized the company into three divisions, focused on operating systems, the Office product group and an entertainment and hardware business.
Mr. Gates took pains Thursday to minimize his role at Microsoft, saying that the company could innovate and continue to lead in the software industry despite his diminished presence.
"The world has had a tendency to focus a disproportionate amount of attention on me," he said. "In reality, Microsoft has had an unbelievable breadth and depth of technical talent."
John Markoff reported from Redmond, Wash., for this article and Steve Lohr from New York.
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Source: New York Times Technology
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