Can Gates the businessman be Gates the innovator?

WASHINGTON, JAN 15: Bill Gates and the company he co-founded, Microsoft, are known for many things. Innovation, however, is not one of the...

WASHINGTON, JAN 15: Bill Gates and the company he co-founded, Microsoft, are known for many things. Innovation, however, is not one of them. Over the last 25 years, Microsoft has built itself on software products that, while useful and popular, have not been cutting edge. Many, like Windows, grew from ideas developed somewhere else. But now Gates has adopted a new role as Microsoft’s `chief software architect,’ handing off his chief executive responsibilities to president Steve Ballmer. After making his mark as a businessman, Gates wants, figuratively, to head back to the garage and tinker again.

"My guess is that Bill Gates simply doesn’t have anything to prove anymore, and he found out that the last few years haven’t been all that pleasant," said Linus Torvalds, founder and chief architect of the rival Linux operating system. Microsoft’s rise from a dorm room discussion to become the highest-valued american company is the most stunning business story of the past quarter-century. While the company founded by Gates and Harvard classmate Paul Allen in 1975 created new software in the mid-1970s for the altair computer – a kit computer assembled at home that used punch cards for programs – it purchased or copied many of its more famous products.

The Windows interface, for example, looked quite similar to the first versions of Apple’s Macintosh software and used similar ideas for menus and icons. The two companies were involved in a long bitter patent dispute over the software from 1988 until 1997, when they settled. Microsoft was nearly a latecomer to the internet as well, allowing Netscape Communications Corp to develop and market the first software used to browse the world wide web.

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Microsoft reversed itself in 1995, buying a license for third-party technology in order to quickly bring its own browser, internet explorer, to market. The company does have its share of innovations – the recently announced cleartype technology for easier reading on computer screens, its line of visual software development tools, and parts of the windows nt operating system for businesses.

Microsoft’s marketing and business deals – some would say ruthless deals – brought internet explorer to prominence, and led to an antitrust battle. "All of this stuff required him to be hands-off on the software," said Drew Major, chief scientist for rival Novell Corp. "I think he’s always going to be in charge, but I think he wanted to go have fun." Gates has admitted that the company’s antitrust battles have been straining, and Microsoft’s success has required him to be a full-time CEO. He started handing off day-to-day management of the company in July 1998, when he appointed Ballmer president.

That transition was completed Thursday, though Gates will remain chairman. "The bigger question here is how does Microsoft transform itself," said Michael Gartenberg, vice president of the Gartner group research firm. "Bill can be the visionary for this transformation, now that he has time."

Meanwhile, Gates said in an interview aired on Friday he does not expect the government’s landmark antitrust suit against his company to lead to its breakup. "It’s not something that would make sense, it’s not anything that we expect to have happen and we think it’s reckless that that’s being discussed by the government," Gates told NBC’s "Today Show."

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The interview was taped on Thursday just after Gates had handed over the company’s reins to his No 2, Steve Ballmer, who will become chief executive officer. Gates will remain chairman of the world’s largest software maker, which he co-founded in 1975.

He said the management change was unrelated to ongoing negotiations with the government over the antitrust case. The government favours breaking up Microsoft, people familiar with the talks in Chicago have said. Asked about the recent mega-merger between Internet and media giants America Online Inc and Time Warner Inc, Gates said it had come as a surprise. "Well, I didn’t predict it," he said.

"I can understand why they did it. It’s an absolutely gigantic company, it’s a fierce competitor of Microsoft in many, many areas." Some industry observers have suggested that the creation of a powerful rival to Microsoft may weaken the arguments for reining in the dominant software maker, which a federal judge late last year found to be a monopoly.