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It Had to Happen Sometime: Gates (Slowly) Passes the Torch

Everybody needs to calm down.

Sure, Bill Gates' announcement last week that he'll be leaving his day-to-day responsibilities at Microsoft in 2008 is probably the biggest news to ever come out of Redmond. After all, Gates is the architect and talisman of the company, the public face not just of Microsoft but, for many, the technology industry as a whole. All of that is obvious.
http://rcpmag.com/news/article.aspx?editorialsid=7536

And, there's an air of nervous anticipation among Microsoft watchers regarding the ascent of Ray Ozzie to head technical guru and the restructuring of the team that will take Microsoft forward on the technology front. We get that, too.
http://rcpmag.com/news/article.aspx?editorialsid=7537

So, yeah, this is a big deal, no question. But check out some of the reactions to Gates' announcement. Nobody seems quite sure what to make of it. We've got those who have already started to talk about a "revolution":
http://weblog.infoworld.com/techwatch/archives/006812.html

...and those who don't expect too much of a change in the status quo:
http://seattletimes.nwsource.com/html/businesstechnology/
2003070379_brier19.html

Then we have those who just don't know what to think:
http://www.internetnews.com/bus-news/article.php/3614206

...and so their headlines end in question marks:
http://www.usatoday.com/tech/techinvestor/corporatenews/
2006-06-18-microsoft-future_x.htm?POE=TECISVA

You'll notice in all of these stories that the usual suspects -- analysts, pundits and commentators -- are all over the place on this one, too. Gates' decision, although not exactly a big surprise to many, has led to a general freak-out, a sort of near-panic about the state of the company that is so critical to the financial futures of so many players in the industry. But that panic is ridiculous and unnecessary on several levels.

First of all, Gates has said for years that he couldn't see himself running Microsoft at 50. Well, he's 50 now. Second, Gates has slowly been distancing himself from running Microsoft for years. He turned the CEO role over to Steve Ballmer six years ago, and it's obvious that he's been spending more and more time over the last few years working with his charitable foundation. Third, when Microsoft acquired Ozzie's Groove Networks last year, the buzz was that Ozzie would eventually become the new Gates -- or at least head of a team to replace Gates -- on the technical side. Fourth, Gates' departure from his day-to-day role is still two years away, which signals that Microsoft has learned something about leadership transitions after the somewhat uncomfortable Gates-Ballmer CEO handoff. Gates isn't walking out the door tomorrow.

What will Gates' departure and Ozzie's takeover mean for Microsoft from a technology perspective? What course will the company set for its future? Right now, despite all the speculation, nobody knows for sure. And that's OK because we don't have to know right now. You'll notice that Wall Street reacted coolly to Gates' announcement; Microsoft's stock price barely budged the next day. We should all take a cue from the button-down types. Partners, customers and observers have a couple of years to watch the Microsoft transition -- one that obviously has a plan behind it -- and to offer their input on it, which, we hope, Microsoft's new brain trust will receive with an open mind. So, there's no need to panic...for now.

What should be the first thing on Ray Ozzie's agenda as chief software architect at Microsoft? What do you think of Bill Gates' decision to step down? Tell me at lpender@rcpmag.com

Should Ballmer Go Next?
News of Gates' eventual departure has opened up a pretty interesting little "State of Microsoft" debate among lots of observers and analysts. A few opportunists are suggesting that Steve Ballmer should follow Gates into the sunset and step down as CEO. One is even lining up potential replacements.
http://money.cnn.com/2006/06/15/technology/business2_workingtech_0615/
index.htm?section=money_technology

Granted, it's been a tough year for Ballmer and Microsoft on Wall Street, but surely his departure would just cause too much upheaval in Redmond. Besides, he's still a link to the company's origins and a pit bull of a fighter with a lot of life left in him. Plus, some financial analysts say Microsoft's outlook is getting better.
http://www.forbes.com/markets/2006/06/19/microsoft-0619markets11.html

There's Just No Way It'll Be Cool as the Original
...because if there's something Microsoft isn't, it's cool. Apple still has the market cornered there. Nevertheless, and despite its money-losing foray into video-game systems, the rumors that Redmond is planning a rival to the iconic iPod (the xPod, maybe?) appear to be true.
http://www.foxnews.com/story/0,2933,199814,00.html

What name would you give Microsoft's iPod rival? Tell me at lpender@rcpmag.com

Your Say: Microsoft, Adobe and Courtroom Battles
Faithful readers will remember an edition of the newsletter a couple of weeks ago that mentioned Adobe potentially suing Microsoft over a spat concerning the removal of the "save to PDF" function from Office 2007. You might remember that it was Microsoft that wanted to include a "save to PDF" feature, but Adobe said no -- and then things got a little ugly.
http://rcpmag.com/reports/article.aspx?editorialsid=157

Well, apparently, Adobe is still mulling over the option of taking Microsoft to court and hasn't ruled it out.
http://www.publish.com/article2/0,1895,1977293,00.asp

You all had some intriguing thoughts about Adobe, PDF and XPS (Microsoft's portable document format, a PDF competitor) as well as about companies that battle Microsoft in the legal system. A sampling:

J Fast won't be switching to XPS anytime soon and doesn't seem too enthused about Microsoft in general. Not much ambiguity here:

"Not one thing M$ ever developed has been of their own creativity; bought, stolen, borrowed then stolen is their motto isn't it? I am glad the EU is taking a stronger stance against the behemoth of Microsoft than the Department of Justice ever did and hope Adobe considers also going in for the fight as well. I would love to see Microsoft broken up as the DOJ had originally intended into separate companies with completely different ownership for each. Long Live the Penguin!!!"

A lot more support, though, came down on the side of Microsoft and XPS.

Steven wrote to say that he would switch to XPS from PDF "in a heartbeat," and he wasn't alone. Most of you who wrote to me felt as though Adobe was making a mistake by asking Microsoft to remove the "save as PDF" feature.

Mark wrote:

"Wow, I just read your article on this, and I am really disappointed to hear that Microsoft is going to remove 'save as PDF' from Office 2007. I am using the beta of that now and love this feature. Adobe just shot themselves in the foot on this one. I hope Microsoft presents XPS to whatever standards bodies are needed to make it the de facto standard in both the U.S. and in Europe. Make XPS a standard and offer it free to the world. Provide free tools for it and see how far Acrobat drops in price!"

And an entirely different Mark wrote to express his frustration with PDF in general:

"I'm tired of Adobe software. It takes forever to load, acts like it is single-threaded (lots of wait states), and is brittle. I wish Adobe would quit adding functionality and make what they've got run better."

As for companies that take Microsoft to court, you weren't overly impressed with most of them either. Kevin offered this very thoughtful e-mail on the topic in general and the Adobe situation in particular:

"No one likes it when a company or individual acts like they have a 'right' to a market. If someone comes up with a new product that is new, or just different, why do you have the right to your existing market share? Isn't that anti-competitive in itself? I understand the complaint that Microsoft is a monopoly; however, Adobe knew that before getting in to the game, and that is why they chose to be compatible with Windows. Can they really be shocked that Microsoft, or some other company, would come up with a competitive format?

As far as the 'Save as PDF' functionality, well, I think they have an argument there. Did they notice that SQL Server Reporting Services has been offering this functionality since its release? I can see that Office is more of a threat though. If their tactic is to make money I'd suggest waiting until Office 2007 is released and then throwing a lawsuit for licensing fees...that'd be more lucrative. If Adobe is just trying to protect their market share, well, I believe it will cost them much more than it ends up being worth. It seems to be fighting a loser's battle versus innovating to win. In the end, I think they should take Microsoft up on their concessions; they don't offer those very often and it speaks volumes of Adobe's position."

Jason also made some thought-provoking points here, summing up what I've always felt about government or regulatory intervention into the technology industry:

"Obviously, everyone has the right to protect their intellectual property, but I think many of these guys think that the court room is an "easier" way (as opposed to Microsoft-like innovation) to fight and receive heavy settlements than it is to battle it out on the marketing field. Let's face it; watch dogs like the European Union, etc. don't have enough of a root understanding of the technology that they are screaming over in the first place. Their cry is all too often, "We're protecting the consumer, etc.," but tell me why having save as PDF in Office products, built in virus checkers, etc. is bad for the consumer? Oh yes, it's actually bad for the competitor. As we go forward, so-called specialized programs are going to become mainstream and will be included, whether the competitors or EU like it or not."

Jerome is in the same camp: "If Microsoft has a dominant market position on the desktop, they have the right to bundle and put whatever technology they see fit in their operating systems."

...and Steph thinks it all comes down to jealousy:
"My little rant about the whole situation is I personally believe that it boils down to envy. Other companies wish they can be Microsoft. Adobe is acting like a whiney child in the grocery store when his mother tells him he can't have that piece of candy by the checkout register. Microsoft has complied with what (Adobe) have asked for and actually made some compromises with them… I am sorry I am sick and tired of all this petty...[um, let's just say "stuff"--LP] that goes on between these larger companies all because they feel like Microsoft is a monopoly."

Hey, Steph, you're not alone. Dan's ready to chuck the whole business:
"I agree with you that Adobe's move could be a shot in the foot. I also agree that they missed a great marketing opportunity by demanding that MS remove the save to PDF feature. The industry just keeps rolling along on litigation and sitting on its duff twiddling around with old technology. It's not surprising I can't wait for retirement to get out of IT."

Dan, enjoy your last days in the lion's den. And, to everybody else who has written to me but hasn't been featured in the newsletter yet -- never fear, I'm getting to you. Thanks again for reading and taking the time to write. I love hearing from you.

Got anything else to add? Drop me a line anytime: lpender@rcpmag.com

Posted by Lee Pender on June 19, 2006 at 11:53 AM


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