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Weekly Column

Go Home, Bill: It's time for a new era at Microsoft -- if only the company were ready.

Status: [CLOSED] comments (74)
By Robert X. Cringely
bob@cringely.com

This is the last week of full-time work at Microsoft for Bill Gates and given that I have written more than 40 columns about Microsoft over the years, it wouldn't make much sense for me to ignore this event. Yet that is almost what I did, which I believe is telling. It frankly didn't matter much to me that Bill was retiring. But then I figured longtime readers would expect a comment and perhaps there is some underlying theme here that IS worth 1,500 words. So rather than a fond or relieved farewell to BillG, I'd like to use this occasion to ask some deeper questions: "How relevant is Microsoft today?" and "Does the departure of Bill Gates really matter?"

A few months ago producers from The Money Programme on BBC-2 called me to arrange an interview for the TWO ENTIRE SHOWS they were preparing on Bill's retirement from Microsoft. No comparable calls came from the U.S. networks, which didn't surprise me because: 1) they wouldn't think so far in advance, and; 2) one executive's retirement -- even Bill Gates -- simply isn't worth that level of coverage. This is one area on which I am sure Bill and I agree, since he, too, is bemused by the hoopla.

But since the BBC called so long ago I've had plenty of time to think about the significance of this day, both to us and to them. I finally figured The Money Programme was interested because of vestigial class consciousness in British culture, and especially in British broadcasting. Bill Gates is viewed as a kind of industrial maharajah in some quarters, more so the further you get from the USA. In those parts people still think he makes a difference to Microsoft's success or failure. Clearly I disagree.

If we were to place the importance of Bill Gates in the history of both Microsoft and the personal computer industry he'd be up there with most anyone. I'm not here to claim that Bill's contributions weren't significant, because they were. At half a dozen points during the history of Microsoft Bill pushed or pulled in such a way to change the course of his company and the industry as a whole, there is no doubt of that. The question is whether he REMAINS as important, which he clearly doesn't or they wouldn't let him leave. If it would help Microsoft they'd prop up Bill like the body of Lenin in Red Square to motivate the troops and intimidate the competition. And he'd let them do that, too.

Bill had to go. I cover the reasons for this in some detail below, but like any executive position in a U.S. public company, he could remain only as long as his value was perceived as higher than the liabilities he presented.

One way of looking at this is that Bill is no longer needed by Microsoft. Raising kids you do your best to instill in them certain values that will continue to serve them well when you are gone. From that perspective, the time is probably long past when Bill could really force change on Microsoft. This is proved, I think, by the debacle of Windows Vista, which came in years late and WAY over budget, still not working very well and missing most of the ambitious features that were originally promised. Vista happened on Bill's watch with lots of folks like me pointing and criticizing for years before the OS finally shipped. If Bill had been able to do something about Vista, he would have. Nobody -- NOBODY -- likes shipping bad products. The simple fact is that there was little to nothing Bill or any one person at Microsoft could do to save Vista. Bill helped create the environment that inevitably led to Vista, but having done that he was unable to change that environment enough to avoid shipping a bad product.

Jim Allchin took the fall for Vista, but its poor performance was the result of the actions of many Microsoft executives over many years.

The last two executive actions on the part of Bill Gates that had singular effects on the future of Microsoft were: 1) his 1995 Think Week that resulted in Microsoft shifting course to flow with the "Internet Tidal Wave," ultimately destroying Netscape, and; 2) his 1988 decision to back Jeff Raikes' proposal to bundle most of Microsoft's productivity applications into what they called Microsoft Office, which effectively destroyed all Microsoft's competitors for shrink-wrapped applications. The first action was that of a strong chief executive operating at the very top of his game while the second was that of a major shareholder who was willing to accept lower earnings in the short term for the long-term success of his investment.

These were radical and dynamic positions to take that resulted in creating thousands of millionaires in the greatest peacetime transfer of wealth since OPEC. But they were also 13 and 20 years ago, respectively. If Gates took another Think Week and determined Microsoft's future lay in baked goods or virtualization, could he turn the entire company toward one or both of those product directions today? I don't think so.

No one person can control Microsoft today, which has been obvious to Gates for at least eight years, since that's how long ago he put Steve Ballmer in the CEO job. For at least eight years, then, these guys have known that their jobs are not so much to steer the Microsoft ship as to try and keep it from drifting onto the rocks. That's the way it is with huge and successful companies. At best you can trim the sails, because to come about (to significantly shift direction) is just too dangerous for the money machine.

This is not to say that Microsoft isn't still ambitious, but its ambitions are bounded by the company's own success. Starting any business that is perceived as having less than $1 billion in sales ought to make no sense at all for Microsoft unless NOT starting such a business might lead to the company's failure. That's certainly the case with MSN, for example, which is too small for Microsoft to bother with yet too important for Microsoft NOT to bother with. The only logical move for Microsoft, then, was to make the MSN business big enough to matter and the only way they could see to do that was by acquiring Yahoo, which explains this year's failed acquisition. Microsoft's failure to buy Yahoo doesn't change this scenario, either, so look for Microsoft to do something -- anything -- to grow that business, because they can't strategically afford to do the logical thing, which is to kill it.

To survive in the long term the way that General Electric has survived, Microsoft will have to keep reinventing itself, which necessarily requires a change of leadership and yet another reason for Gates to go. It's also a reason for Ballmer to go, by the way, and those who think he'll stay another 8-10 years are simply wrong. There hasn't yet emerged at Microsoft (or anywhere else) the right leader to take Microsoft to its next destination. Maybe they'll find that new leader in time, maybe not. In the meantime they'll try to stay in the top 1-2 positions in every market segment, but none are big enough (or dominant enough in terms of market share) to replace the mature businesses Microsoft has today. This is not good.

I see years of further financial success for Microsoft and ultimately some significant growth in the stock as Wall Street forgets Gates and forgives Ballmer and returns Redmond closer to its historic price-to-earnings ratios. In the long run (five years or more) the future of Microsoft is cloudy and troubled. But Wall Street doesn't care about five years from now. And for the next half decade Microsoft will be nothing but a huge money machine.

So the ultimate reason for Gates' retirement is to allow Microsoft shares to rise so he'll once more be the world's richest man and can devote even more money to improving the world through the Bill & Melinda Gates Foundation.

Gates and Microsoft -- and especially Microsoft shares -- have been suffering for a decade from a number of leadership transgressions that helped make Microsoft the huge company it is today but did so while breaking rules, breaking competitors, and ultimately breaking the law. What's sad is that it didn't have to happen this way. The question I would ask Bill Gates on his way out the door for the final time is: "If you had played fair and not abused your monopoly power would Microsoft be significantly smaller or less successful than it is today?"

I think the answer is "no," that Microsoft's bullying didn't really gain the company much in the long run and certainly hurt Gates' wealth, which is a number that has been very important to him over the years.

Gates might argue that he didn't feel he could take a chance on playing fair, which is a position you'd expect from someone who knows the value of luck in these things. I just think it is sad that Microsoft, having created a huge and very efficient system for recruiting the best and the brightest workers, never allowed those people a chance to really show what they were capable of.

So have a happy retirement, Bill. I hope you save the world and win that Nobel Peace Prize. And while you're at it, please throw a little money into SIDS research, eh?

Comments from the Tribe

Status: [CLOSED] read all comments (74)

The demise of M$ will not happen for a century or not at all. Like IBM, or other former monolith's ; it's a matter of time. Raking off the cash, slowly losing one per cent here, 2 per cent there to better ideas. Not anticipating or even acknowledging new innovations, like ATT it just will slowly wither at the roots.

It will not get any new innovators or tolerate them,
because it is too disruptive to the status quo.

I have seen this with successful companies or startups for over 30 years. Great innovation, then financial success, then slow atrophy and stagnation. Well M$ is in the stagflation mode, can't grow much, being blocked by EU, China, India and other masters of the faked copyright and the free use of Open Source.

What is M$'s choice, create another boring release of Windows, same security holes, same tired outmoded interface, same boring utilities.

Then the iPhone comes out, changes the paradigmm,
who needs a laptop anymore, except the big corps.

What's next? You know M$ won't be leading the charge, they will have enough cash to be the johny come lately, but lead the charge?

Oh well look at the ASUS eee, see the future M$ embedded OS laptops, Nokia 810, with add-ons and
tiny, who needs a 10 lbs laptop with Vista when
a 2 lbs. or less linux unit will do?

Caught on yet m$ I doubt it.

Jan Clairmont, KMGO
Paladin of Security

Jan Clairmont | Jul 08, 2008 | 9:31AM

Oh no, not this again: "...Gordon Moore and Bob Noyce invented the integrated circuit,.."

Jack Kilby of Texas Instruments invented the integrated circuit. Bob Noyce "invented" it also, a tiny bit little later, but beat Kilby to the patent office.

Chris | Jul 08, 2008 | 5:19PM

I think it's a shame that a technology company like Microsoft is led by someone who has no real passion or vision for the next turn that technology will take. Steve Jobs is a quite the obnoxious teenage boy, but I don't think that anyone could deny his passion or vision. He is a slightly warped example of how a technology firm should function. When you have a driving force that doesn't know what it wants but knows it wants something *new*, you get Vista. Ha!!!

Andy | Jul 09, 2008 | 12:10AM