By Daisuke Wakabayashi

REDMOND, Washington (Reuters) - Microsoft Corp. (Nasdaq:MSFT - news) founder
Bill Gates said on Thursday that over the next two years he will ease out of a day-to-day role at the company he built into the world's biggest software maker.
ADVERTISEMENT

His decision to step down immediately as chief software architect and to relinquish all managerial roles in July 2008 comes at a time when Microsoft, whose Windows operating system runs an estimated 90 percent of the world's personal computers, is struggling to find new sources of growth.

Gates, 50, passed the technical mantle to Ray Ozzie, who joined Microsoft last year and is at the heart of Microsoft's push to maintain its dominance by transforming software into services that generate an ongoing stream of revenue instead of just a one-time sale.

By July 2008, Gates said, he will be working full-time for the Bill and Melinda Gates Foundation -- which he has funded with his software billions to promote health and education projects around the world -- but will still be working "part-time at Microsoft."

The world's richest man, whose wealth was estimated at $50 billion in March by Forbes magazine, will remain as Microsoft's chairman and an advisor on key development projects past the 2008 transition.

"Obviously, this decision was a very hard one for me to make," Gates told a news conference. "The change we're seeing today is not a retirement, it's a reordering of my priorities."

Few expected the news would affect operations at the Redmond, Washington-based company, which employs more than 60,000 people worldwide. Gates began taking less of a role when he handed the chief executive reins to long-time deputy Steve Ballmer in January 2000.

"Bill Gates may step away from day-to-day responsibility but he will never, ever step away from Microsoft," said Anthony Sabino, professor of business at St. John's University.

Shares in Microsoft rose 0.9 percent to close at $22.07 on the Nasdaq, and fell 9 cents in extended trading on the Inet electronic brokerage after Gates' announcement.

Microsoft stock, whose stratospheric rise during the 1990s inspired a generation of tech entrepreneurs, has fallen 13 percent over the past year as investors question its ability to find new growth markets.

Microsoft has been trying to respond to threats from companies such as Internet search leader Google Inc. (Nasdaq:GOOG - news) and Apple Computer Inc. (Nasdaq:AAPL - news), which built a lucrative business around its iPod digital music player.

The company has also stumbled in releasing the next version of Windows, delaying its shipping date several times and cutting out some highly anticipated features.

Its MSN network of online services has struggled to gain traction against Google and Yahoo Inc. (Nasdaq:YHOO - news), and it has spent billions of dollars trying to unseat Sony Corp. (6758.T) in the video-game console market.

"I bet to a certain degree he (Gates) might be getting tired of beating his head against the wall and trying to find other profitable revenue streams besides their Windows operating systems," said Shannon Reid, manager of Evergreen Strategic Growth Fund, which owns Microsoft shares.

At the same news conference as Gates, Ballmer, 50, spoke with his usual confidence and enthusiasm, saying Microsoft aimed to add another 1 billion customers in the next decade.

"We're really also announcing the transition we're making as a company to reach the next level of success and meet the needs of a world hungry for new technology," Ballmer said.

"We will continue his vision of thinking big and executing even bigger."

Gates said Ozzie -- who created Lotus Notes, which was one of the first popular corporate e-mail programs and is now sold by IBM -- will replace him as chief software architect. Craig Mundie, another chief technical officer, will take the new title of chief research and strategy officer.

Ozzie, 50, joined Microsoft last year as one of three chief technical officers after it bought his Groove Networks start-up focusing on collaborative software.

"Certainly, he's got the experience and respect within the industry, but he's not going to be able to take on all Bill Gates' roles because as the founder, Bill Gates had a kind of moral authority that no one else can really take on," said Matt Rosoff, an analyst with Directions on Microsoft, an independent research firm.

So what does this really mean? I'm thinking Bill is going to be so embarrassed about further delays of Vista that he is going to just retire altogether from Microsoft. Thats my guess!