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6/22/2007
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John Foley
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Bill Gates' Legacy: Outmaneuvering The Competition

As he eases out of management, Microsoft's co-founder will be remembered as an inspiring leader and brilliant businessman.

Staying Power
The first time I met Gates was at Computer Associates' CA World trade show in the New Orleans Convention Center in 1997. He was there to talk up a partnership that promised a new level of interoperability between CA's industry-leading systems management platform, Unicenter, and Microsoft's own systems management tools. Seated next to him was CA's smooth-talking founder and CEO, Charles Wang.

What happened in the interim speaks to Gates' staying power. In the 10 years that have passed, New Orleans was nearly destroyed by Hurricane Katrina, and Wang retired as CA's CEO in 2000, then as chairman in 2002, as questions were raised about the company's accounting practices, eventually resulting in a government probe and the prosecution of several senior executives, though Wang escaped the mess. At Microsoft, meanwhile, revenue ($44.3 billion in fiscal 2006) and net earnings ($12.6 billion in fiscal 2006) have grown more than five times.

Gates' self-serving tendencies--glad-handing with tech CEOs, luring talent from competitors, mimicking technical innovation created elsewhere--give fodder to critics who say he capitalizes on the ideas of others, charges too much, and underdelivers.

Another way to look at it: He has outsmarted and outpaced the competition. Gates could be considered lucky if he did that just once, with his original PC operating system, but he's done so repeatedly. He beat Apple in PCs, Lotus in spreadsheets and e-mail, Novell in departmental networks, Netscape in browsers, and the old-guard Unix vendors in business servers.

"He was able to take on every one of those guys and beat them at their own game, and he beat each one in a different way," says Rich Powers, director of advanced technologies and architecture with FMC, who began his career as an IT professional in 1977, just two years after Microsoft was founded. "The place you don't want to be is on the other side of where he wants to go."

For the past few years, Gates has been focused on competing against Linux. In November 2003, I asked him whether Microsoft might do something more to improve compatibilities between Windows and Linux. "Tell me any area we're not doing enough," he snapped. "I mean, seriously, what area do you think we could do more in?"More recently, however, Microsoft has struck a series of agreements with Linux vendors, including Novell and Linspire, designed in part to improve Windows-Linux interoperability. What changed? Microsoft is wielding its patent portfolio to force Linux vendors to play by its rules, extending its influence, yet again, to a new part of the market.

Microsoft's ever-expanding reach also will be part of Gates' legacy. The company has branched from PC software to server software, business applications, mobile devices, home entertainment, and, of course, the Web. Gates has made sure that the various pieces have a deep vein of common software, APIs, and protocols running through them.

It took awhile--say, 20 years--for Gates & Co. to figure out the business technology market. "He struggled to understand the enterprise, and it really bugged me," says Ralph Szygenda, group VP and CIO of General Motors, who met recently with Gates to map out the software needs of the auto manufacturer's 130,000 Windows users over the next few years. In the early days of working with Microsoft, Szygenda says, it was "like talking two different languages."

But Gates came to appreciate the needs of large businesses as his own company grew. "Later on, he understood," Szygenda says. "They listened." Today, Microsoft's business division, with $4.8 billion in revenue in the quarter ended March 31, is second only to the company's client software business in size.

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