Gates Casts a Long Shadow

While He Will Keep Role of Chairman, Move Lets Others Take Center Stage

Bill Gates holds Cecilia Massango during a visit to a health center in Mozambique in 2003. (By Themba Hadebe -- Associated Press)

Microsoft Corp. will gradually lose the day-to-day participation of its longtime iconic leader, Bill Gates, but the company should make the transition "without missing a beat," he said yesterday, as he begins to focus more on his charity work and the company continues to battle its software rivals.

"The world has had a tendency to focus a disproportionate amount of attention on me," said Gates, 50, who over the next two years will move to concentrate on the operations of his philanthropic organization, the Bill & Melinda Gates Foundation. "In reality, Microsoft has always had an unbelievable depth and breadth of technical talent," he said.

A Harvard dropout who co-founded the company three decades ago, led it to prominence and became the world's richest man, Gates yesterday urged the public to recognize that his departure will refocus attention on other people at Microsoft, including the executives who will fill his shoes.

Microsoft's chief technical officer, Ray Ozzie, 50, will take over Gates's role as chief software architect, while Craig Mundie, Microsoft's chief technical officer for strategies and policies, will assume Gates's research and strategic initiatives. Ozzie, who founded International Business Machines Corp.'s Lotus Notes Inc., joined Microsoft through the acquisition of the office software company Groove Networks Inc. in 2005. Mundie is a 14-year veteran of Microsoft.

Steven A. Ballmer, a Harvard classmate who took over as chief executive from Gates in 2000, will remain in that role, and Gates will remain chairman and will continue to act as "counselor" for the company.

"We've all grown up in his shadow," Mundie said in an interview. "Bill has left a pretty indelible mark on the company."

Shares of Microsoft rose 19 cents to close at $22.07 before the announcement, which was made after the close of financial markets. As of 8 p.m., shares had fallen 12 cents in after-hours trading. Gates is the largest single shareholder, with nearly 10 percent of the company's outstanding common stock.

William H. Gates III, the son of a prominent Seattle lawyer, dropped out of college in his junior year and founded Microsoft in 1975 with his childhood friend Paul Allen, now the owner of professional football's Seattle Seahawks. Of the two, Gates's wonkish devotion to trade journals and his high-stakes risk-taking style were credited with the company's steady growth.

The company's software, the MS-DOS system, was introduced in 1981 on IBM personal computers. Microsoft later vanquished its software rivals, gaining a reputation for its fierce competitiveness. Microsoft's operating system still dominates personal and office computing, with about 95 percent of computers relying on Microsoft programs for word processing, e-mail, Web browsing and PowerPoint presentations.

The Redmond, Wash., company Gates is leaving behind is locked in an intensifying rivalry with firms such as Google Inc., Yahoo Inc., Mozilla, AOL and other software companies, many of which are making money by selling online advertisements.

The key battle for Microsoft, which in 2000 lost an antitrust case brought by the Justice Department , is to maintain the attention of customers. Microsoft was once the primary gateway for all computing -- it controlled nearly all operating systems and the vast majority of Internet browsers. But its rivals have made big inroads into both, drawing in customers by offering free software.

"This is a company whose business model is under attack," said Tim Boyd, a research analyst at Caris & Co. The company has to try not to undermine its legacy business while developing its own line of free online software. "They missed the boat so far in regard to search and other Web-based applications, and they're trying to play catch-up. They have a long way to go before they can catch up with companies like Google."

In recognition of its need to adjust to that shift, last year Microsoft restructured into three main divisions and said it would focus on developing free Web software.

David Eller, software and services analyst at Rochdale Securities, said the next step is to focus on Internet-based television and movies and develop technology that makes money off of selling the rights to online entertainment. Gates has left all the pieces in place to make such moves, Eller said.

"If someone else did take over tomorrow, everything is already happening," he said. "Gates has been the strategic visionary, but Steve Ballmer has had more of an active role over the last few years than he has been given credit for."

Staff writer Kim Hart contributed to this report.