Making official what had been in the works since 1998, Microsoft Corp. cofounder Bill Gates has passed the company's chief executive torch to his right-hand man, Steve Ballmer. Gates will remain chairman and take a new position as chief software architect.
The shift in operational power from Gates to Ballmer began officially in July 1998. At the time, Gates spoke about the need to relinquish day-to-day control of the company to Ballmer and concentrate on longer-term product strategy and development. Gates repeated that need at last week's announcement. Despite fanfare, Ballmer's ascension to president, not last week's news, was the watershed.
"This is about following through on the idea that made Steve president in the first place," says Matt Kursh, an MSN portal executive who recently took a leave of absence.
The title change is highly symbolic. The company's well-documented shift in focus in the mid-1990s after almost missing the first Internet "tidal wave" - as Gates put it famously in 1995 - is in fact far from complete. Microsoft faces mounting pressure from Web-based applications, alternative operating systems and online consumer services that have sprung to life in the past couple of years. Its battle with the Department of Justice has drained key executives' time and concentration.
Removing Gates from operational duty should help the company better aim its myriad - and often disjointed - projects at the main competitors that Ballmer named in a hastily assembled press conference: America Online, IBM, Oracle and Sun Microsystems.
The heads of Microsoft's product divisions have been reporting to Ballmer - not Gates - since Ballmer's promotion in 1998. He has also overseen massive changes in the company's online strategy, including a renewed emphasis on the Internet-access business, the spin-off of the Expedia travel service and a sale of 25 percent of the CarPoint auto site to Ford Motor. Ballmer was acting head of the new-media division during a nine-month search for a group leader that finally led to Rick Belluzzo, a friend of Ballmer's. The 43-year-old Harvard graduate also ran the sales, marketing and technical-support divisions in his 20-year tenure.
When asked last week what the chief software architect at Microsoft will do, Gates flashed some wit: "I might be threatening to write code. That's something I haven't been able to threaten in the last couple of years. But mostly, I'll be sitting with product teams and talking about how to bring the pieces together. It'll mostly be strategizing, rather than the number of lines of codes I'll write myself."
Ballmer's promotion and Gates' new role should have little, if any, effect on Microsoft's ongoing antitrust battle with the Justice Department and the 19 state attorneys general. Despite reports last week that the Justice Department is actively seeking to break up Microsoft during settlement talks in Chicago, Ballmer clearly signaled his distaste for such a move at the press conference announcing the title changes.
With his hands planted on his hips, Ballmer barked: "It would be reckless and irresponsible for anyone to try to break up this company. It would be the single greatest disservice that anyone can do to consumers in this country."
Moreover, while government lawyers cast Gates as the central villain in the case, it's the company's conduct - not that of Gates himself - that's on trial in Washington. And many of the thousands of incriminating e-mail messages introduced in the case were either written by or sent to Ballmer.
"I don't see why it should make a great deal of difference," says Dan Wall, a former Justice Department antitrust attorney now in private practice. "I think they could bring in Mother -Teresa and the Justice Department wouldn't be impressed." The Justice Department declined to comment.
At the news conference, Ballmer outlined the challenges and goals for the company as it moves its core software products onto the Web and expands its portfolio of interests. He mentioned application hosting, wireless communications and new programming languages - initiatives that Microsoft has been working on for some time, and not necessarily in a leadership position. A full road map for the next three years will be announced in April.