Gates resigns as Microsoft CEO, elevates Ballmer

Making official what has been in the works since 1998, Microsoft Corp. co-founder Bill Gates 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 at length about the need to relinquish day-to-day control of the company to Ballmer and concentrate on longer-term product strategy and development within its various divisions.

“This is about following through on the idea that made Steve president in the first place,” said Matt Kursh, a portal executive.

Microsoft faces increasing pressure from Web-based applications, alternative operating systems and on-line consumer services that have sprung to life in recent years. Its battle with the Department of Justice has been a drain on key executives’ time and concentration. Removing Gates from operational duty may help the company better aim its myriad but often disjointed projects at its main competitors, including America Online, Sun Microsystems, IBM and Oracle.

Gates has been Microsoft’s CEO since its foundation in 1975, but the heads of Microsoft’s product divisions have been reporting to Ballmer since his presidential promotion in 1998. Ballmer has also overseen massive changes in the company’s on-line strategy, including a renewed emphasis on its Internet access business, the spin-off of its Expedia travel service and a sale of 25 per cent of its CarPoint auto site to the Ford Motor Company. 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 good friend of Ballmer. The 43-year-old Harvard graduate has also run the Microsoft sales, marketing and technical support divisions during his 20-year tenure.

When the call is made to rally the troops, Ballmer, with his booming voice and propensity to pound tables and turn beet-red, usually answers the call. He’s even poked fun at his oratory style and the company’s foibles in a trade show video skit, dressed in a plaid carny’s jacket and trying to hawk copies of the failed Microsoft Bob OS add-on.

During the press conference announcing the change, Gates said: “It’s a nice milestone to look back over the last 25 years and say we got something done. But it’s also a milestone to look ahead and say, what can Microsoft do in the years to come?”

When asked 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.”

Ballmer’s promotion and Gates’ new role may have little effect on Microsoft’s on-going antitrust battle with the Department of Justice and 19 state attorneys general. With his hands angrily planted on his hips as Gates stood by with a hand over his own mouth, Ballmer’s angry retort was a telling sign that nothing in the company’s stance during settlement talks or in the courtroom will change.

“It would be reckless and irresponsible for anyone to try and break up this company,” Ballmer said. “It would be the single greatest disservice that anyone can do to consumers in this country.”

During the conference, the famously energetic Ballmer immediately used the opportunity to outline the challenges, competition and development goals for the company as it moves core software products onto the Web and expands its portfolio of interests. Ballmer’s vision includes application hosting, wireless communications, new programming languages – initiatives that Microsoft has been working on for some time. A full road map for the next three years will be announced at a conference in April.