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Gates stepping away


REDMOND, Wash. -- Three decades after he started Microsoft Corp. with the dream of placing a personal computer in every home and business, Bill Gates said yesterday that he would leave his day-to-day role there in two years.

He will shift his energies to the Bill & Melinda Gates Foundation, which his Microsoft fortune has made the world's largest philanthropic organization, dedicated to health and education issues especially in poor nations.

At a news conference after the close of the stock market, Gates, 50, emphasized that he was not leaving Microsoft altogether. He said he planned to remain as chairman and maintain his large holding in the company.

"I always see myself as being the largest shareholder in Microsoft," Gates said.

But the move, analysts said, points to the changes sweeping the software industry. Probably more than any other person, Gates has been identified with personal computer software, while computing is increasingly shifting to the Internet.

"I think we'll look back at this day as the separation between two eras in software - the first being software in a box, and the second software distributed over the Internet for free and funded by advertising," said George F. Colony, chief executive of Forrester Research. "The new era requires a complete re-examination of Microsoft's business model, which has been one of most profitable the world has ever seen."

Gates' college classmate and business partner of 26 years, Steven A. Ballmer, also 50, will remain chief executive. He assumed that post in 2000, with Gates remaining engaged in the daily operation with the title of chief software architect.

Ballmer emphasized in an interview that Gates would continue to give the preponderance of his time to Microsoft during the two-year transition.

But the transition will begin immediately, Gates said, with his role as chief software architect taken over by Ray Ozzie, 50, one of the company's three chief technical officers. Ozzie, whose software background includes the conception of Lotus Notes in the 1980s, joined Microsoft last year and has been leading its strategic response to the growing Internet challenge the software company faces from companies such as Google and Yahoo.

Gates said that he and Ballmer had begun discussion of a transition some time ago but that a decision had been made only in the past few weeks.

Gates said his primary motivation was a desire to spend more time on the issues that he has decided to address with his charitable foundation, whose resources will continue to swell as he makes good on his commitment to shift most of his personal fortune, said to approach $50 billion. He remains the largest single shareholder in Microsoft, with 9.6 percent of the stock, a stake currently worth $21.6 billion.

But his decision to begin scaling back at Microsoft comes at a critical juncture for the company, a dominant force in the computing world for a quarter-century.

Although revenues are at record levels and the company's profits are running at a stunning $1 billion a month, Wall Street has grown increasingly critical of Microsoft's inability to make significant headway in new markets as diverse as video games, Internet television and Web advertising.

The company's stock has fallen from a high of $28.38 in the past year to close at $22.07 yesterday. Gates' announcement sent the share price down slightly in after-hours trading.

As part of the realignment, the company elevated a second chief technical officer, Craig Mundie, 56, who will be given the title of chief research and strategy officer. Working with Gates during the transition, he will take over responsibility for the company's research and product development efforts.

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