Gates Passing the Torch to Ballmer

The Summer Olympics are still a month away, and the torch relay never got close to Seattle. But another torch was passed in Redmond last Friday, with business implications fully on par with the world's largest sporting event.

Last Friday was the last day on Bill Gates' time card for Microsoft (Nasdaq: MSFT). Gates stepped down from the CEO chair eight years ago, but stayed on as chairman of the board and chief software architect. Now, the iconic super-geek is simply the chairman of the board, still there to help with big-picture strategy but far removed from the nitty-gritty day-to-day business.

CEO Steve Ballmer needs his old friend to stick around a bit longer. Microsoft is at a crossroads these days; the old ways of doing business are crumbling to dust, and the way forward is shrouded in darkness.

Sure, we're still putting Microsoft Office and Windows on our computers -- but consumers and businesses have not been too impressed with Windows Vista and keep lobbying for more support for the previous XP version. Google (Nasdaq: GOOG) is executing a sneak attack on Office with a cloud-computing productivity suite, and Sun Microsystems (Nasdaq: JAVA) backs another free and fully functional alternative. How does Ballmer plan to counter these threats to his core business?

One answer to that question seemed to lie in Yahoo! (Nasdaq: YHOO) and online search-and-marketing solutions. But that buyout fell through, and both companies have suffered from the fallout. Going the acquisition route to online business supremacy is hardly easy. Top-echelon players like Google, Yahoo!, and Amazon.com (Nasdaq: AMZN) come with massive price tags, but going after second-tier rivals like IAC (Nasdaq: IACI) hardly seems worth the paper the contract would be written on. No disrespect to IAC, but if that's the savior of Microsoft's online plans, then flip-flops with sweatpants and a plain white T is haute couture.

So Bill picked an interesting time to play a smaller role in Microsoft's future. Ballmer needs to pick a strategy, or a basket of strategies, and get moving toward a brave new chapter in Microsoft's history. I don't think he has the luxury of making a whole lot of mistakes anymore, lest Redmond become a large footnote in the annals of business. Show your Olympian chops, Steve. It's now or never.

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