Gates transitioning out, Ozzie steps in as chief software architect

Bill Gates relinquishes his roles as chief software architect to spend more time with his charity work.

Microsoft’s Bill Gates will leave his day-to-day duties at Microsoft in July 2008 to pursue his passion to fulfill the mission of helping less fortunate people throughout the world through the foundation he started with his wife.

Gates, the founder, chairman, and chief software architect, plans to remain as chairman of the company for the foreseeable future, he said during a press conference after Thursday’s final bell on Wall Street.

“I believe with great wealth comes great responsibility,” he said. “Responsibility to give back to society… responsibility to see those resources put to work to help those most in need.” As of last year, Gates and his wife had endowed the Bill & Melinda Gates Foundation with more than $28.8 billion to support philanthropic initiatives in the areas of global health and learning.

During the two-year transition away from Microsoft, Gates said he would continue to work as hard as ever. “This was a hard decision for me, I am lucky to have two passions,” he said.

Ray Ozzie, the CTO for Microsoft, will immediately assume the title of chief software architect and will work side-by-side with Gates over the next two years.

“I’ve worked with Ray for over 20 years and his vision has led to some of the most important developments in our industry,” said Gates.

Craig Mundie, another CTO for the company, also will immediately take the title of chief research and strategy officer and work with Gates to take over his responsibility for Microsoft’s research and incubation efforts. Mundie also will partner with general counsel Brad Smith to guide Microsoft’s intellectual property and technology policy efforts.

CEO Steve Ballmer said the transition would not cause a ripple in the company.

“We plan to make a smooth and orderly transition to a new set of technical leaders without missing a beat.” He also said Gates’s announcement was an emotional day for him given their close personal relationship, but Ballmer predicted that his friend would go on to become the greatest philanthropist of all time.

Gates said Microsoft would continue to thrive into the future, mostly based on the talent and commitment at the company.

“The world has focused a disproportionate amount of attention on me,” said Gates. “In reality, Microsoft has always had a strong depth and breath of technical talents.” Indeed, experts say it won’t be a talent hit that Microsoft takes but more of a visibility hit.

“This is really going to be the end of an era in many ways,” says Dwight Davis, an analyst for Summit Strategies. “I don’t think Microsoft will suffer dramatically from his departure in a technical sense, but from a profile sense, from an industry image sense, Microsoft is not going to be perceived to be the same without him at the helm. Only a handful of companies have had a real strong personality that was very synonymous with the company itself and Bill Gates was on top of the heap in that regard.”

Over the years, Gates has been spending more and more time on work with his foundation. Last year, Gates, his wife, Melinda and rock star Bono were named persons of the year by Time magazine. The honor touched off debate about how long Gates might remain at Microsoft. But really, that question has been open for years.

“It doesn’t come as a big shock to me,” says Jackson Shaw, a former Microsoft manager and now senior director of product management for Active Directory and integration solutions at Quest Software. “We all have been waiting for when Bill is going to spend more time working on his charity and foundation and stuff that is really good for the world. But the concern in my mind as he moves away is who will fill the void, because Bill is a special guy.”

Gates, 50, started Microsoft in 1975 with childhood friend Paul Allen and took the company public in 1986, a move that started its rise to the largest software company in the world. Gates last gave up duties six years ago when he turned over CEO responsibilities to Steve Ballmer.

“Gates is one of the large than life individual that exist in the technology industry; he is a huge part of Microsoft’s identity and with his departure Microsoft will be forever changed,” says Rob Enderle, president of the Enderle Group and a Microsoft observer for many years. “But all corporation go through this.”

Enderle says Ray Ozzie was specifically brought on board to replace Gates and now it is up to Ozzie to step up and show he can run the technical side of the company.

But observes say that regardless of who takes over on the technical side, the company is still is run by CEO Steve Ballmer and now even more so with Gates departing.

Enderle says Gates departure also leads to the question of when Ballmer may exit.

“The expectation is that Steve leaves sometime within a two to five year window,” says Enderle. “When you have executives with roughly the same start date and roughly the same age they leave within 10 years of each other. I think Steve will leave no sooner than two years but no more than five.”

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Copyright © 2006 IDG Communications, Inc.

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