Gates Hands Microsoft CEO Title to Top Exec
Microsoft Corp. Chairman and co-founder Bill Gates, who has run the software company for 25 years, named his longtime No. 2 executive and best friend, President Steve Ballmer, as the company’s new chief executive Thursday.
Gates, who will remain chairman, also created a new role for himself as Microsoft’s chief software architect to support the company’s new strategic direction.
Ballmer, 43, who was appointed Microsoft president in July 1998, has essentially been running the software titan’s day-to-day operations in recent months and is credited with overhauling the company’s management structure.
Although Ballmer will now be CEO, analysts expect Gates, 44, to remain the de facto leader of the company.
“Gates is unique in the Microsoft culture,” said Peter Christy, vice president of Internet Research Group in Los Altos. “I can’t imagine anyone not jumping when Bill Gates sends them an e-mail. I can’t imagine that anything short of him not showing up for work would really influence the impact he has on the rest of the company.”
Gates plans to devote himself full time to developing new software as Microsoft tries to adjust to the tectonic shift taking place as technology moves away from desktop computers. Increasingly, software is being developed that runs over the Internet or on other products, such as cellular phones or hand-held devices, none of which requires the Microsoft Windows operating system that has become the company’s mainstay.
Despite his promotion, Ballmer sounded much like Gates on the subject of Microsoft’s landmark antitrust trial. Ballmer blasted the recent leaks emerging from the Department of Justice in Washington, D.C., suggesting that Microsoft should be broken into three separate companies.
“It would be absolutely reckless and irresponsible for anyone to break up this company,” Ballmer said. “It would be unprecedented and a disservice” to customers, consumers and employees.
Microsoft stock rose $2 to $107.81 in regular Nasdaq trading, then inched up to $108 in after-hours trading on the change-in-leadership news.
Ballmer first met Gates at Harvard when they were undergraduates and a few years ago Ballmer was the best man at Gates’ wedding.
After graduating, Ballmer spent several years at Procter & Gamble before accepting a job with Microsoft as director of hiring in 1980. Ballmer owns about 5% of the company and those shares make him the fourth-richest person in America, worth $23 billion, according to Forbes magazine.
Microsoft is legendary for having top executives that still spend up to one-third of their time writing or analyzing software code, and Gates is no exception. Ballmer, on the other hand, is more of a businessman than an engineer and is therefore unlikely to replace Gates in that regard, Christy said.
If Gates is seen as predatory, Ballmer is not only predatory but confrontational, Christy said. His promotion was probably motivated less by a desire to appease antitrust regulators than by a desire to prepare the company for a possible breakup, he said.
“If they have to split up [Microsoft], they want to do it on their own terms,” Christy said. “As long as they have to face it as a real possibility, why not do whatever steps you think you need to do it organizationally?”
In deciding to hand over the chief executive reins to Ballmer, Gates said the company was taking the next step in a management evolution that has been occurring for about 18 months--ever since Gates promoted Ballmer to president.
“In my new role, almost 100% of my time will be devoted to new technologies,” Gates said at a news conference at the Microsoft campus. “My commitment is 100%. It is a very exciting evolution for me and it is a very good transition for the company.”
Ballmer, who has been known to scream at company meetings and sometimes gives orders while carrying a baseball bat, is known for his prodigious energy. Analysts say Ballmer will bring a shrewd business sense and a front-line knowledge of key customers as well as competitors such as IBM.
Ballmer minced no words about the challenges Microsoft faces in the next 10 years, citing Sun Microsystems, IBM, Oracle, America Online and numerous Internet start-ups as key competitors.
But Microsoft, Ballmer said, will remain a software-driven company that will try to capitalize on the shift away from the desktop computer to other innovations in computing hardware, wireless, e-commerce and hand-held devices.
Microsoft, he said, will not become a media or content company. He distinguished the software company from online giant AOL, which has announced it would merge with media giant Times Warner.
“I don’t think we need mergers to get these things done,” Ballmer said. “It’s probably good strategy for them, but they didn’t acquire a lot of software programmers this week. Software is our heritage and software is our future. Our goal in the months ahead is to take decisive action to pull the pieces together.”
Analysts said that Ballmer would be stronger at changing Microsoft’s PC-focused culture as it evolves further toward Internet-based services.
“Ballmer is a very aggressive manager and his mission is going to have to shake up the company internally to prepare itself for yet another transformation,” said Dwight Davis, an industry analyst for Summit Strategies. “The company culture has evolved over the years but it is still ‘PC-centric.’ ”
For Gates, the question is whether his role as technology guru and innovator can truly inspire the company to create new software that will become the standard over the Internet.
“It’s going to put Gates in more of a position of evangelist for this new business model and that’s probably where he’s best suited rather than running the nuts and bolts of the company,” said Mark Snowden, a financial analyst for GartnerGroup.
The management changes underscored Microsoft’s new strategy that focuses on software services--a technology shift that Gates and Ballmer said will transform the industry in the same way Windows software and the Internet did.
“We see ourselves today at the same type of inflection point and we need to bring about some break-through technologies,” Gates said.
This means that one day soon consumers will be able to store medical information on secure places on the Web, view their medical history, interact with their physicians and insurers, as well as pay their bills, he said.
Or consumers will be able to purchase an airplane ticket and their flight will automatically appear on their schedule, he said. Or it will automatically notify friends, family or business colleagues.
“That kind of service is the kind of service we envision,” Ballmer said.
The first phase of this new strategy began with the roll-out of Windows 2000, which is aimed at controlling the big servers that help drive the Internet, Gates said.
Microsoft is also working on developing a new Internet-based platform of software called Windows Services. Gates said it would be the foundation of Microsoft’s software services strategy.
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Times staff writer Karen Kaplan and Bloomberg News contributed to this report.
