Friday, June 16, 2006

Bill Gates and Microsoft

It will be quite interesting to see how the market, money managers, mutual funds, and investors in general respond on Friday to the big news from Thursday after the market close that Bill Gates will be relinquishing more of his day-to-day responsibilities of running Microsoft over the next two years and assuming a part-time role at the company as he spends the lion-share of his time at the charitable foundation that he shares with his wife, Melinda. As a shareholder and employee, I wish Bill great luck and am not worried in the slightest about the prospects for the company with Bill in his new role.

The truth is that Gates has had a much smaller role at the company for a number of years now, especially since Steve Ballmer assumed the position of CEO a few years ago.

As a shareholder, and employee, I don't in any way feel that Bill's shift in focus will in any way diminish the present and future prospects for the company. Steve Ballmer is going strong and can be expected to charge forward as strongly as he has in the past. Ray Ozzie is a very strong technologist who will probably offer even better technological leadership than Bill himself has provided over the years. Overall, Microsoft has an incredibly strong team in place.

Sure, there may be a knee-jerk negative reaction by the cynics, as there always is, but that should never be a big concern of true, long-term investors.

I'd invest more heavily in Microsoft myself, but I've already elected to put 100% of my Roth 401(k) contributions into Microsoft stock. Just this morning I had made the election to reinvest my 401(k) dividends in company stock as well.

This is truly an exciting time. The competition between Google, Yahoo, Microsoft, Linux, Open Source, Web Services, and a zillion small, agile startup companies will end up producing a greater amount of business and stimulate the kind of spending that provides an enormous engine of growth for the entire U.S. economy.

I actually had a ringside seat, literally, for a big part of the show today. Not at the press conference, but at the much larger employee "town hall" meeting where Gates and Ballmer went much deeper into the evolution of the company and its philosophy over the years and what it will be like going forward. I won't try to go into specifics, but just say how Gates and Ballmer emphasized that people have continually underestimated the company and its patience, persistence, and tenacity and the way people at Microsoft "keep on coming." Ballmer emphasized quite strongly that "innovation is our top priority." Needless to say, Gates got a standing ovation.

To be very clear, Gates is *not* walking away from the company, even after the two-year transition period. He will continue to be Chairman and he says that he will continue to participate in projects on a part-time basis. As the company press release states, "after July 2008 Gates would continue to serve as the company's chairman and an advisor on key development projects." His "genius" in the past was not so much in managing the day-to-day affairs of the company of being heavily involved in technical product decisions, but in offering key insight on key issues for key projects at key points in time. Even on a part-time basis, he'll continue to have opportunities to do so even after July 2008.

Gates may have a unique figurehead status, but Ballmer is an amazing character to see in action.

The amazing thing about Microsoft is to see so many young but really smart "kids" who are so extremely capable and so extremely energetic and so extremely motivated to carry on the Microsoft tradition.

-- Jack Krupansky


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