News

UPDATED: Gates To Retire in 2008

• By Ed Scannell and Stuart Johnston
• June 15, 2006

Gates said he will gradually transition over his day-to-day responsibilities in order to devote more of his efforts towards the Bill & Melinda Gates Foundation. He and his wife, Melinda, have endowed a foundation with more than $29.1 billion.

“After careful consideration Steve [Ballmer, Microsoft CEO] and I have decided to announce a two-year transition plan that will shift my day to day responsibilities to a group of incredible technical leaders who already a doing some amazing things at the company,” Gates said during a televised press conference from the company’s Redmond campus on Thursday after the close of U.S. stock markets.

The company’s executives, including Ballmer, who has been Gates’ close personal friend since the two met at Harvard in the early 1970s, played down any impact from Gates’ pending departure. Gates said that the press has had a tendency to focus a disproportionate amount of attention on him but in reality Microsoft has always a strong depth and breadth of technical talent.

“We have a great team of people. I really believe we can make this transition without missing a beat. I was thrilled a year ago when Ray joined the company. We have all seen him step up and help drive our Live services strategy. For the next two years Ray and I will work side by side to ensure a smooth transition,” Gates said.

Craig Mundie, previously chief technical officer of advanced strategies and policy, immediately takes on the title of chief research and strategy officer. Additionally, Mundie will be paired with general counsel Brad Smith in areas related to Microsoft’s intellectual property and technology policy efforts.

Ozzie joined the company a little more than a year ago when Microsoft bought his company, Groove Networks, technology that is now being incorporated into Windows Vista and Office 2007. Prior to starting Groove, Ozzie created and sold Lotus Notes to IBM.

Gates said the decision was a hard one for him to make but he believes he will leave a company that is well positioned technically and financially for the future.

“Even as I shift my focus by 2008, Microsoft is well positioned for success in the years ahead. We continue to generate $1 billion in profit every month, and we are about to launch great versions of Windows, Office which is already generating a lot of excitement,” Gates said.

Some analysts were not surprised at the news noting the stage was being set for such a move six years ago.

“I’m not completely shocked to hear [about Gates’ pending retirement]. He started the process six years ago when by relinquishing the CEO spot to Ballmer,” said Dwight Davis, vice president and practice director at market researcher Summit Strategies, Inc.

Given that Gates has come to embody Microsoft, Davis said it could cause a minor problem for Microsoft’s future but doesn’t believe it is something Microsoft can’t overcome over the long term.

“Even in his role as chief software architect, he’s the face and the personality that represents the company. That’s going to be a clear loss but I don’t think that represents a threat to the company. It [Microsoft] is really well-established, so barring any mistakes by senior executives, I don’t see [Gates’ departure] as a very disruptive move,” Davis said.

In early 2000 Gates took over the role of chief software architect while Ballmer became the company’s CEO. Ballmer will continue to be responsible for all of Microsoft’s day-to-day operations and business strategies. Not unexpectedly, Gates heaped generous praise on the work Ballmer has done over the past six years.

“He (Ballmer) has done a fantastic job by every measure, from the people he has brought in, to the new initiatives he has overseen, and how he has generally run the company. He has doubled the sales and profits of the company during that time,” Gates said.

Gates will not relinquish full day-to-day participation until the end of the company’s 2009 fiscal year, which ends on June 30, 2008.