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Gates Transition Plan Shows He's Ready For A Change. Is His Company?

His departure is coming sooner than expected. But it's just the start of an era of change Microsoft must embrace.

Microsoft will miss Bill Gates. The computer industry may miss its moppy-haired celebrity spokesman even more.

When Microsoft's chairman disclosed last week that he would relinquish his technical leadership role at the company by divvying up his responsibilities between two trusted colleagues--effective immediately--it marked the end of a 30-year stretch in which he's been, more than anyone else, the guru of the PC industry. Gates is unshouldering that responsibility to take on something bigger and more important: devoting all of his energies and most of his wealth to the challenges of global health and education.

Bill Gates -- Photo by Ted S. Warren/AP

Photo by Ted S. Warren/AP
Gates, 50, seemed relaxed in a news conference on the company's Redmond, Wash., campus when he revealed plans to "reorder my personal priorities." Gates and CEO Steve Ballmer did their best to portray the months ahead as business as usual. "It's not a retirement," Gates said. In fact, however, he already has one foot out the door. Gates gave up his chief software architect title to CTO Ray Ozzie on the spot, he's taking an unprecedented seven-week vacation this summer, and he expects Ozzie and Craig Mundie--a 14-year company veteran who also gains power in the shake-up--to report to Ballmer within about a year.

Notably, Gates is giving up the reins five years earlier than planned. He didn't admit that last week when asked during the press conference whether his departure is sooner than expected, but that's exactly what's happening. In August 2003, Gates said in a speech in Detroit that he had "a little more than 10 years" left in his career. Do the math: He's cutting out five years early.

Gates, Ballmer, and a few close insiders have been mulling a transition plan for more than a year, but it wasn't until a few weeks ago that Gates put the wheels in motion. He's giving Microsoft and the rest of the industry two years' notice. Between now and July 2008, BillG, as he's known inside the company, will work alongside Ozzie--a highly accomplished software executive in his own right--and Mundie, who's being promoted from CTO to chief research and strategy officer. In short, it becomes Mundie's job to feed emerging technology into Microsoft's product pipeline, and Ozzie's to make Microsoft's vast portfolio of products work together.

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Gates will continue as chairman and, beyond the middle of 2008, serve as an adviser to the company. There are plenty of loose ends to tie up over the next 24 months. Windows Vista and Office 2007 are due later this year, Exchange 2007 sometime around the turn of the year, and Longhorn Server in 2007. At the same time, Microsoft is rapidly building out its "Live" hosted software offerings, trying to leapfrog Google in search technology, writing next-generation ERP applications for business, and aggressively pushing into home entertainment.

In a March interview in his office to discuss the upcoming release of Office 2007, Gates gave no indication that the clock was ticking on his tenure. About that same time, Microsoft revealed, to the dismay of many, that Windows Vista wouldn't ship in time for this year's holiday shopping season as planned. It's possible that the pressures of missed deadlines--Microsoft is famous for them--have begun to wear on him.

Gates has long had an exit strategy--throwing his energies into the charitable work done by the Bill & Melinda Gates Foundation, which has $29 billion in assets and stands to gain more as the world's richest man funnels his wealth to chosen causes. Few will quibble with Gates' decision to concentrate on the planet's biggest health hazards and its most disadvantaged people; no time is too soon in the battle against diseases such as AIDS and malaria. Gates pointed last week to a "common thread" between the world of computer technology that ignited his passion as a young man and the research into health and education in developing countries. "It's about using technology not just for the privileged few, but for everyone," he said.

Microsoft has been putting the pieces into place to allow Gates to pull back. "Good for him," says Glenn Rodgers, deputy CIO of the Food and Drug Administration, a Microsoft customer. "The company is positioned extremely well for the future." Gates turned over the CEO job to Ballmer six years ago, and just last fall, Microsoft restructured into three business divisions headed by four presidents. The acquisition of Groove Networks in April 2005 brought along Ozzie, whose influence has risen quickly. Mundie expects decision making to be more decentralized in the new-look Microsoft.

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