Microsoft minus Gates faces a precarious future

Stan Beer
Sunday, 18 June 2006 19:28

Opinion and Analysis

The market may not have responded to the announcement of the retirement of Bill Gates from the pivotal role of chief software architect at Microsoft. However, maybe that’s because the market had already factored in his departure from an active role in the company he founded in 1975.

Microsoft shares have been on a downward slide since May, when the company announced its plans to invest big dollars to get into “new markets”. It’s as if already then those in the know knew that Gates was on the way out and the company was desperately trying to reinvent itself as a new age IT player under the guidance of new leaders.

Those new leaders, Ray Ozzie, chief software architect, and Craig Mundie, chief research and strategy officer, have big shoes to fill. Both men, Ray Ozzie in particular, are no doubt very capable operators.

However, Ozzie and Mundie are not the man who built the most successful software company in history. They are not the man who, together with Intel, transformed the computing cost equation into one that made the Windows PC an indispensable item for a huge proportion of homes in the developed world. Finally, they are not the man who always seemed to have the knack of staying one step ahead of the game for more than two decades.

With Gates out of the picture by the time he turns just 52, Ozzie and Mundie become like sons who have just inherited the empire that daddy built. Neither of them played a hand in helping daddy build it, but they’ve been given the keys to a massive enterprise and a huge bank account. Daddy may be sticking around for a couple of years to make sure his apprentices know what they’re doing but one thing he can’t teach them is how to stay number one.

Meanwhile, budding young empire builders such as Sergey Brin and Larry Page are beating the pants of Microsoft in the web services space with Google, while internet players such as Yahoo and eBay dominate in other areas. In the games market, Microsoft has to contend with the likes of Sony and Nintendo and the mobile space is a free for all, with both Symbian and Linux providing strong opposition to Windows CE.

The only real area of domination for Microsoft, and apart from its database business, the only area where the company makes a serious profit, remains the desktop with Windows and Office. The release of Windows Vista in 2007, which Gates will be around to oversee, should provide a boost in sales for Microsoft. Whether the company can repeat that success with the release of Office 2007 is another question. While Vista will provide users with must have advantages, not least enhanced security, highly priced Office is no longer a must have product for users, especially since open source alternatives can be had for free.

There is also another issue now that Apple has thrown its hat into the Intel ring. The company that is once again headed by its co-founder Steve Jobs is putting itself in a strong position to capture a significant slice of the Windows market by giving users of Macintosh computers the ability to run Windows and Mac OSX concurrently. Add to that, a growing and persistent nibbling at the heel of Windows by Linux in certain markets, plus a growing hostility to Microsoft in the EU, and the way ahead for the software company appears to be anything but smooth sailing. The question is with Bill Gates no longer at the helm of Microsoft, can his newly appointed captains safely traverse the unchartered waters.