Microsoft Chairman and Chief Software Architect Bill Gates plans to move away from overseeing his company's day-to-day operations in July 2008 to spend more time working with his foundation.
The software vendor announced Gates' plans late Thursday after the close of financial markets in the U.S.
Microsoft also announced that Chief Technical Officer Ray Ozzie will immediately assume the title of chief software architect and begin working with Gates on all technical architecture and product-oversight responsibilities "to ensure a smooth transition."
Craig Mundie, the company's chief technical officer for advanced strategies and policy, will take the new title of chief research and strategy officer and will work with Gates to assume responsibility for the company's research efforts. Mundie also will be working with general counsel Brad Smith on Microsoft's intellectual property and technology policy efforts.
"I am very lucky to have two passions that I feel are so important and so challenging," Gates, 50, said during a news conference called to discuss the transition plan. "Microsoft is well positioned for success in the years ahead. We have a clear vision of how we will meet new challenges, [and] we continue to generate almost a billion dollars of profit every month."
He went on to downplay his own role at the company, though he telegraphed plans to remain as chairman for the foreseeable future.
"Any view that the innovation [at Microsoft] comes primary from me reflects the notion that there has been an overfocus of my contribution," Gates said. "From Office, Windows, SQL Server, Exchange and Xbox -- I am not the primary person on any of those things."
As for his role after July 2008, Gates said, "I am not leaving Microsoft. I am here working as hard as I ever have over the next two years."
He went on to add: "I don't see a time in the future where I won't be the chairman of the company. I want to have that association my entire life."
Gates said he made the transition announcement now to send a clear message that "this transition is a very serious thing, [and] it is starting now." In addition, Gates said he and Microsoft CEO Steve Ballmer have gone "carefully through the things I actually do -- not what is written -- and how those will be taken on."
Ballmer stressed that the company "is ready and capable of making a smooth and orderly transition to a new set of technical leaders without missing a beat.
"Nurturing innovation in all its forms will remain our highest priority," Ballmer said. "We will be tenacious and persistent of driving our [Windows] Live initiative. We need to be relentless in improving our agility as a company. That means ensuring [that] our products come to market on a timely basis ... and our time and energy are focused on customers.
"We have the team, the strategy, the pipeline and the will to keep on winning over new customers," Ballmer said.
Neither Ozzie nor Mundie made statements at the news conference.
Ozzie, 50, worked on the first electronic spreadsheet, VisiCalc, in the early 1980s, then joined Lotus Development in 1983 to develop Lotus Symphony. In 1984, Ozzie formed Iris Associates Inc. to develop Lotus Notes, and in 1997, he founded Groove Networks. Microsoft bought Groove Networks in April 2005 and named Ozzie its chief technical officer.
Mundie, 56, joined Microsoft in 1992 to create and run the Consumer Platforms Division, which has worked on the company's non-PC platform and service offerings, including the Microsoft Windows CE operating system; software for handheld PCs, Pocket PCs and Auto PCs; and early telephony products. Mundie also started Microsoft's digital TV efforts and was behind the company's much-publicized Trustworthy Computing Initiative.
Gates started Microsoft in 1975 with Paul Allen and took the company public in 1986. He served as Microsoft's chairman and CEO until 2000, when Ballmer took over as CEO. That same year, Gates and his wife formed the Bill & Melinda Gates Foundation, whose assets now total $29.1 billion.
Charles King, an analyst at Pund-IT Research, said Gates is stepping aside at the same time Microsoft is preparing the release of two "classic old-style" products: its new version of Office and its Windows Vista operating system.
"In my mind, the market seems to be stepping away from that kind of computing," said King, who said that power users are shifting away from desktops to highly mobile devices and applications that take up less virtual and physical space. "Is Bill Gates the guy who is able to lead Microsoft into that new mobile, more virtual kind of world?" he asked.
David Smith, an analyst at Gartner, echoed that sentiment, saying Microsoft faces a changing technology landscape and needs to "reinvent itself." Ray Ozzie, he said, "is better suited to do that.
"I think it's inevitable that founders will step down, but it's actually surprising when it happens," Smith said.
Microsoft has been making strategic changes in its product mix, and Smith pointed to Windows Live, its ongoing effort to deliver services via a browser. In that respect, Microsoft faces challenges from delivery of software as a service and even Web 2.0, which involves a set of technologies for improving collaboration and sharing over the Web.
Gates has responded to major market challenges before. In particular, he wrote the legendary 1995 memorandum, "Internet Tidal Wave," where he expounded on how critical e-commerce would become to business survival.
But Smith said this time, it's going to be harder for Microsoft. "I think the challenge is a little tougher," he said. "I would say that the company has certainly grown to a rather large size, and when it gets to a certain size, it's a lot harder to change."
Computerworld's Heather Havenstein and Patrick Thibodeau contributed to this report.