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January 14th, 2000

[6:00 AM] Beleaguered Microsoft Replaces Bill Gates As CEO
by Staff

OK, forgive the title of this story, it was designed to poke fun at Microsoft and the mainstream media that for years could not use the word "Apple" without the accompanying word "beleaguered." Bill Gates has indeed stepped down as CEO of Microsoft and has been replaced by college chum Steve Ballmer, currently the company's President, and long time Microsoft executive. The official line is that Mr. Gates, the company's CEO for 25 years now, wants to spend more time focusing on software development and future direction. Mr. Ballmer will instead focus on operations and the day to day management of the company. Mr. Ballmer will also be elevated to Microsoft's Board of Directors. According to Microsoft:

Accelerating the company's major strategy initiative, Microsoft Corp. today announced that its cofounder, Bill Gates, has created a new role for himself -- Chairman and Chief Software Architect -- so that he can dedicate all of his time to helping drive the next generation Windows Internet platform and services. Microsoft announced that Steve Ballmer becomes president and CEO, and will take over management of the company.

These changes were announced following the release of Microsoft® Windows® 2000, which the company said is a crucial building block of its strategy to focus on software services -- a major technology shift that will transform the industry in the way the Graphical User Interface (GUI) and the Internet did. Driving this major shift is the need for a better Internet User Experience to enable businesses, consumers and developers to better personalize and tailor the services they use, and to store and share the information they need -- any time, any place and on any device.

At the core of this strategy are Microsoft's plans, announced today, to assemble the first Internet-based platform of Next Generation Windows Services (NGWS), which will power new products and services and incorporate such features and capabilities as a new user interface, natural language processing, application development approach, schema and new file system -- all of which have been in development.

As part of this platform, Microsoft said that a key set of NGWS will be hosted on the Internet and will be infused into future versions of Windows. The NGWS platform will create a host of new opportunities for other businesses, and is the foundation of the company's software services strategy, first articulated in September of last year at Microsoft's developer strategy day and described in further detail during Bill Gates' November 1999 Comdex speech.

Gates also indicated that Ballmer would become a member of the Microsoft Corp. Board of Directors effective January 27.

You can find more information on Microsoft at the company's web site.

The Mac Observer Spin: So far, we have not been able to find a single analyst who publicly thinks that this move has anything to do with the DOJ. Our take is somewhat contrary to that however. The initial reaction from Wall Street and other industry analysts is that Microsoft has made this move because the company needs to have a good manager at the helm. This is certainly true as Microsoft has reached the kind of market saturation that will force it to focus on execution and operations. Microsoft's entire compensation package for its full time employees is centered around stock growth. That growth has consistently come from revenue increases, but there are only so many price increases, charging for beta-releases, and artificial price restructurings the company can rape its customers with (although Microsoft has been rumored to want to move Windows licensing to a yearly lease instead of a one-time purchase which would require their customers to pay for Windows *every year*. What are they thinking?). The company will eventually have to find increased profits from increased efficiency which requires a good manager. Mr. Ballmer is definitely a good manager. At the same time, he is enough of a lughead to comment publicly that Microsoft's stock is overvalued. While true, it is not the kind of thing a company's president, and now CEO, should say. Still, Mr. Ballmer is highly respected within the tech industry and on Wall Street.

In our opinion, the big news is that this move leaves Mr. Gates with the flexibility he may need to try and fight the breakup of his company by the DOJ. The lawyers may be doing the bulk of the work on the DOJ case, but the direction the company takes (and therefore the direction those same lawyers take) comes from the strategic genius of Mr. Gates. While many Mac users may take issue with the concept of Mr. Gates as a technology innovator, despite his fervent claims to the contrary, there are few who can deny that he is the single best strategic business leader the 20th century has seen. If only he would put that ability towards having his company compete on the basis of quality instead of market strength... Then again, that's what got them into this in the first place.

<Far Out Idle Speculation> An idea that is even more fun is to think that Mr. Gates is simply thinking ahead to the time when his company will be split up, and wants to be free from the day to day operations of Microsoft to help steer the break-up itself.</Far Out Idle Speculation>


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