Goodbye, or hello, to Gates?

Jim Louderback speculates on the ramifications of Gates' move. One thing's for certain: It's a loss for the pundits.

So Bill Gates is stepping down and passing the baton of CEO to his long-time friend, confidante, and coworker Steve Ballmer. Ostensibly Gates is going to focus on making great software and great development tools and will leave the business aspects of running Microsoft to Steve. Why did he do this? There are a number of theories.

Make up to break up
Microsoft already knows that the Justice Department is readying a breakup of Microsoft. But it's pretty personal. Congress was not happy with Mr. Gates's testimony, nor was the DOJ. His prerecorded answers to questions during the trial were pretty, well, arrogant. By removing himself from the helm of the ship, he hopes to keep the DOJ from driving the company into the rocks and breaking Microsoft up into pieces.

Make up (two)
The breakup is a foregone conclusion, and Bill just wants to position himself as head of one of the three new companies that will be legislated by the DOJ. Bill wants to make software and development tools. Does that mean he wants to be associated with the Internet, application, or OS business? Probably whichever one gets the development-tools business.

Time-Warner thunder
Time Warner and AOL made a lot of noise on Tuesday. Many pundits opined that now there was a competitor worthy of taking on Microsoft. Microsoft, some even said, pales in comparison to the new behemoth. Gates and Ballmer cooked this one up to try to deflect a little attention onto Microsoft–- still in a better position, they think, to dominate the new economy.

New business models
The software industry is moving from package and OEM-based models to one based on services and free software. The open-source movement has thrust Linux into the server and workstation marketplace, eclipsing Microsoft's triumphant rollout of Windows 2000 (which was originally due in 1997 or 1998). Sun's acquisition of Star Office presages a time when the cash cow of the MS stable, Microsoft Office, will need to be retooled for subscription-based Internet downloads. These kinds of emerging business models require new blood, and Gates turned to Ballmer to deliver.

Ramifications for Investors and Consumers
It's been 25 years, Gates has built Microsoft into a powerhouse, and himself into the richest man in the world. He sees buddy Paul (our new owner, Paul Allen) cavorting on his ultra-yacht in the Mediterranean with Jerry Hall, and dabbling with the Seattle Seahawks and Portland Trailblazers. Bill's got a new baby at home, and another child just entering school. Maybe, just maybe, Bill's gotten tired of being painted as the devil, gotten tired of 20 hour-days steering the Microsoft ship, and gotten tired of all the attention, fighting, and vilification. Why not settle down, buy a small country, and enjoy the fruits of his labor?

What do I think about Gates's move? It's probably a combination of exhaustion, new business models, and the desire to burnish his legacy. Did the DOJ have much to do with it? Maybe a little bit. But 25 years is a long time.

So what does this mean? Microsoft touches a lot of people.

Don't worry, nothing will change for a few years. In fact, Microsoft just might make it easier to do business with them. Steve Ballmer is much more focused on customers and relationships than Gates. Both want to win at all costs, but at least Ballmer knows that sugar makes the bitter medicine go down easier.

I don't think Microsoft will become a bad stock to hold just because Gates is leaving his post. The company's got strong products in the pipeline, good relationships with vendors, and a clear understanding of where they need to go. But if it still hasn't figured out the Internet in two years, or if it hasn't embraced open systems and service-based revenue, I'd dump the stock.

This one's harder. The spiritual leader of Microsoft is heading towards a diminished role. The legions of Bill wannabes that stroll the Redmond campus are probably dismayed right now. Except for those who work in the narrow area that Bill will be concentrating on, they'll probably never get the chance to impress (or more likely, be abused) by God himself. Even though the stock will remain high-- keeping those options valuable-- much of the mission of Microsoft will be diluted. This will be tough for Ballmer to rectify.

We're the biggest losers of all! Without Bill Gates around, we lose one of our easiest targets. It used to be that whenever writers-block hit, all we needed to do was bat-around the "Gates is the Devil" theme. It was always good for a few laughs. Now what will Dvorak, Berst, and I do for cheap laughs? I'm probably more upset about this than anyone! Let me know what you think about Gates' future in the talkback below.