Gates to Scale Back Microsoft Role in 2008

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Microsoft chairman and chief software architect Bill Gates said Thursday that he will step out of his daily role at Microsoft in July 2008 so he can take on a full-time role at the Bill and Melinda Gates Foundation, the charity organization he runs with his wife.

To prepare for this move, Microsoft is enacting a plan that includes executive changes in order to make the transition as smooth as possible, Gates said. Gates, 50, is mainly responsible for giving broad strategic direction to all the programmers who build software at Microsoft.

"Obviously, this decision was a hard one for me to make," he said. "I feel lucky to have two passions that are so important to me. Even as I prepare to shift my focus ... I know Microsoft is well positioned [for the future]."

Gates said he will remain as chairman "indefinitely," but Ray Ozzie, now chief technology officer, is assuming the chief software architect title immediately. Ozzie, 50, came to Microsoft in April 2005 when it purchased his company, Groove Networks. Ozzie is best known for his work on what would eventually become the popular Lotus Notes e-mail and collaboration software.

What It Means

Filling Gates's shoes will be a big task, and it appears Ozzie is going to take on the bulk of that with the chief architect role, which comes as little surprise, one analyst says. "Ray Ozzie was heir apparent to be the heart of Microsoft when he was hired," says Rob Enderle, an analyst with The Enderle Group in San Jose, California. He says the chief software architect position entails being "a programmer's programmer" to the myriad developers working on software at Microsoft. In some ways, Ozzie is more qualified than Gates to take on that role, though Gates's history at Microsoft has made him a larger-than-life character, Enderle says.

Another executive taking a new role effective Thursday is Craig Mundie, who is now chief research and strategy officer and will partner with Brad Smith, Microsoft's general counsel, to lead the company's intellectual property and technology policy efforts. Previously, Mundie, 56, was chief technical officer of advanced strategies and policy, working alongside Gates to develop technical, business, and policy strategies for Microsoft.

Tough Time for Microsoft

Gates will be stepping away from a company that has been struggling to reinvent itself in the face of competition from a new generation of technology companies, such as Google and Yahoo. Microsoft's stock has essentially been flat since 2001; earlier this year it took its biggest one-day drop in five years on news that the company would need to invest more money in research and development.

"The company has obviously found enormous success with Gates, but at the same time, over the past year and a half, its seems like Microsoft has really lost its way," says Charles King, principal analyst with Pund-IT, based in Hayward, California.

Gates will be moving out of his job just as Microsoft releases 2007 Microsoft Office and Windows Vista, the upcoming version of the company's PC operating system. These are two of the largest and most ambitious products it has ever done, and he and Microsoft still have a lot of work before them, King says.

"These are products that are coming to market at a point where large numbers of consumers are moving toward highly mobile devices, and are focusing more on the appliance approach to computing," he says. "It'll be interesting to see what happens with Vista. It's going to have to have some amazing features and capabilities to successfully get [Windows] XP out of people's minds."

Gates's Role

Gates downplayed his role as the great innovator at the company, and said Microsoft will continue to show leadership in providing software that changes people's lives.

"The world has had a tendency to focus a disproportionate amount of attention on me," he said. "In reality, Microsoft has had an unbelievably strong breadth and depth of talent."

Gates founded Microsoft, then Micro-Soft, in 1975 with Paul Allen, and dropped out of Harvard University in his junior year. Five years later Gates persuaded his Harvard buddy Steve Ballmer to join. Ballmer, the first non-engineer at Microsoft, became the company's chief executive officer in 2000 after having long been regarded as Gates's copilot.

Allen left Microsoft in 1983 after he was diagnosed with Hodgkin's disease, a cancer of the lymphatic system.

Ballmer said Thursday was an emotional day for him, having worked "shoulder to shoulder" with Gates for 26 years. He said that even when Gates's role at the company diminishes, his impact will be felt for years to come.

"Bill may reduce his time here, but his imprint on the company will never diminish," he said. "It will continue to be reflected in everything we do."

Gates Foundation

Founded in 2000, the Bill and Melinda Gates Foundation is one of the world's largest charitable organizations, pursuing global health and education initiatives worldwide. The foundation is particularly well known for its efforts to improve the health and welfare of people in Africa. Bill and Melinda Gates and Bono, frontman of the rock band U2, were named "Persons of the Year" by Time magazine in 2005 for their efforts in Africa.

Insiders say that Gates in recent years has become more passionate about his role as a philanthropist than about being the top executive at the world's largest software company. He said Thursday that he has a responsibility to make the world a better place with the "gift of great wealth" that has come from Microsoft's success.

Robert McMillan in San Francisco contributed to this story.

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