Microsoft Closing the Gates Era

Bill Gates has announced his departure from the management team of Microsoft (Nasdaq: MSFT  ) , the software juggernaut he founded more than 30 years ago and guided to an absolutely dominant position in many markets. His title of Chief Software Architect has already been passed on to Ray Ozzie (more on him later), but in order to soften the effect on his company (and its stock price), Gates will make the change slowly. By July 2008, he should have a full-time commitment to the Bill and Melinda Gates charitable foundation, while remaining as advisor and chairman of the board at Microsoft.

If that doesn't sound like a complete detachment, that's probably because it isn't. Gates will likely have a powerful influence over Microsoft whenever he chooses to step in and voice an opinion, no matter how many roles he departs. And it's important to take the time to groom the next generation of corporate leadership for one of the most influential corporations in the world today. Luckily, it looks like that process has been under way for years already.

Microsoft isn't throwing out feelers to outside superstar managers to fill Bill's shoes, and it's absolutely the right move. No matter how much fun it would be to bring somebody like Apple's (Nasdaq: AAPL  ) visionary CEO Steve Jobs or outspoken Oracle (Nasdaq: ORCL  ) leader Larry Ellison aboard to run the mighty ship, it's better to promote rising stars from within. Here's why.

Ray Ozzie joined the company only last year, when Microsoft acquired his company Groove Networks to incorporate its virtual office product into Microsoft Office. Ozzie was already a proven commodity as the chief architect of IBM's (NYSE: IBM  ) Lotus Notes back in the '80s and was known for creating new and exciting software. After a year as Microsoft CTO, Ozzie knows the ropes, and the rest of the team is comfortable with him. Trust is important, and Ray Ozzie has proven his worth. The troops are ready to follow his lead.

Now, this man brings a different mindset to the table. He has a strong vision of a "software as service" business model, where the Web browser and online applications take the place of locally installed software, and is likely to push this idea harder than Gates did. He's also described as a software engineer at heart, a moniker often attributed to Bill Gates in the past, but not so much over the last couple of years. Ozzie's promotions could bring a renewed focus on technology and engineering excellence as opposed to a business-minded direction. It's like the wiz kid in science class taking the stodgy old professor's place at the pulpit and showing the class some new ways to get things done.

With the multitude of new challenges Microsoft is facing right now, that's exactly the kind of change I like to see. The online services division is eating the dust of Yahoo! (Nasdaq: YHOO  ) and Google (Nasdaq: GOOG  ) . The upcoming Windows Vista release comes at a time when Apple and Red Hat are making inroads into the desktop and server markets, respectively. Even Microsoft Office isn't immune to challenges from Sun Microsystems' StarOffice and its free cousin OpenOffice, and even though the Xbox 360 has a healthy head start on the next-generation gaming console market, Sony (Nasdaq: SNE  ) and Nintendo won't just roll over and play dead.

It's a tough assignment, but Ray Ozzie might just be exactly the right man for the job. And when Bill isn't busy effectively allocating his billions to make the world a better place, he'll be there with guidance and advice if Ballmer, Ozzie, and company need it. It's the best of both worlds, and it looks like a graceful way for an iconic leader to hand over the steering wheel to a new captain. Good luck, Ozzie.

Further Foolish Reading:

Microsoft is a Motley Fool Inside Value selection. Give the newsletter a 30-day spin around the blockto see why Philip Durell's team of value bloodhounds singled the company out, and get their take on recent developments.

Fool contributorAnders Bylundowns none of the stocks mentioned but uses many of their products. He thinks that Ray Ozzie is almost as cool as the other famous Ozzie. Foolishdisclosurerules are even cooler.


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