Gates hands CEO post to Ballmer

Exec remains Microsoft chairman

Only a week after Steve Jobs dropped the “interim” from his CEO title at Apple Computer, Bill Gates shocked Wall Street and his industry by announcing plans to step down as CEO of software giant Microsoft, the company he co-founded 25 years ago.

Microsoft’s No. 2, Steve Ballmer, will take over in the top spot, the execs said at a press conference. Gates will remain chairman and take on the role of chief “software architect.” He said he’s committed to devoting his full attention to the company.

In an interview with CNBC following his announcement, he also insisted that it isn’t on Microsoft’s agenda “to go and buy a big content company” to form an enterprise along the lines of the proposed AOL/Time Warner merger.

Speculation fueled

That deal, announced Monday, fueled speculation that Microsoft could be next to acquire a major media property, like Disney or News Corp. Instead, Gates said Microsoft will forge strategic partnerships with content providers as it intensifies its focus on software.

That’s just fine with AOL’s Bob Pittman. “What I heard (at Microsoft’s news conference) was software, software, software,” Pittman told CNBC in a separate interview. “That’s probably good for them, and it’s good for the industry,” which relies on Microsoft for infrastructure, he added.

Contrary to Wall Street analyses, Pittman noted that he expects a combined AOL/Time Warner to increase cash flow faster than AOL’s already rapid pace on its own — some 50% annualized growth over the next five years, according to some estimates.

“You don’t think we put these companies together so they could grow at historical growth rates, (do you)?” he mused. Common logic has it that Time Warner’s slower growth rate will reduce the growth rate for the combined company.

As for Microsoft and Ballmer, the new CEO will also become a member of the Microsoft Corp. board of directors, effective Jan. 27.

Return to first love

“I’m returning to what I love most, focusing on technologies for the future,” Gates said at a news conference. “Steve’s promotion will allow me to dedicate myself full-time to my passion: building great software and strategizing on the future, and nurturing and collaborating with the core team helping Steve run the company.”

Remarking on the ongoing Justice Dept. antitrust actions, in which 19 states are co-plaintiffs, Ballmer, in one of his first declarations as CEO, said it would be “reckless and irresponsible of anybody to try and break up this company … a disservice to consumers.”

Judge Penfield Jackson ruled last November that Redmond, Wash.,-based Microsoft used monopoly powers to harm consumers, competitors and other companies.

Gates’ decision would put Ballmer in the hot seat regarding any legal issues regarding Microsoft.

Ballmer said he planned to focus on the “heightened competition” in the emerging non-PC and Internet arenas.

Gates’ transition is expected to take place after the release, later this year, of the Windows 2000 operating system, the successor of the NT system, aimed at office and professional users.

(Jill Goldsmith in New York contributed to this report.)

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