Commentary: Gates Departure Changes Nothing for Microsoft

There's little doubt that Microsoft Chairman Bill Gates is an incredible businessman and borderline genius. However, his qualifications as technical visionary are quite suspect: He hasn't coded since the days of Microsoft BASIC, and his 1995 book "The Road Ahead" barely even noted the existence of the Internet. As he moves to a life of philanthropy, Gates will establish a reputation as one of history's greatest benefactors, a title that would far outshine any contributions to big business. But let's face the facts: Gates is also the reason that Microsoft has gotten into horrible legal and antitrust troubles around the world, and the culture he established at Microsoft will only slowly be eradicated from the company. It might never be completely exorcised.

I'm not trying to be vindictive. It's just that it's surprising so few people understand that Gates's greatest accomplishments--and failures--at Microsoft are business-related, not technical. For example, he wasn't the first to push GUIs, but he saw how exciting the Macintosh was, stole its interface, and spent the next two decades establishing Windows as a global standard by using occasionally illegal business practices. Responding to the natural environment of sharing that evolved in the early days of personal computing, Gates complained that users were stealing from him and put up what should now be seen as the first offensive against open-source software, a movement that was probably inevitable.

And don't get me started on the Internet. Imagine where Microsoft--and more importantly its customers--would be if the company had started Windows Live services in 1995 instead of 2005. If Brad Silverberg (ex-Microsoft senior vice president) had his way that's what would have happened, essentially, but Gates wanted to keep pushing his monolithic cash cow and instead bundled Internet Explorer (IE) into Windows to shut out a new generation of competitors. Silverberg ultimately left the company because of that decision. And let's just put this one out for discussion: Microsoft's hiring of Ray Ozzie--and Ozzie's subsequent promotion to chief software architect--is an implicit admission that Gates's mid-1990s decisions about IE were dead wrong. Ten years later, Microsoft is finally decoupling IE from Windows and attacking the Internet separately.

Microsoft often makes much of its need for the freedom to innovate and contends that various countries around the world shouldn't be able to prevent it from creating great products for its customers. But over the past ten years, the company has found itself in two major antitrust battles, one of which is still unresolved; has been sued by a large number of customers for product bundling, with an even larger number unable to sue because of legal technicalities; and has released an increasingly delayed series of Windows versions that have left both consumers and businesses in the lurch. Where's all this innovation everyone keeps talking about?

Meanwhile, the company does make more than $1 billion per month, so it must be doing something right. Of course, all of that money is coming from Microsoft's traditional cash cows, not from innovative new products. There's no doubt that Gates is a successful businessman, but his move to part-time control of Microsoft will have little effect on the day-to-day operations of the company. My guess is that this move is purely psychological, designed to help Microsoft employees, partners, and customers deal with his permanent retirement. That way, when Gates leaves for good, it won't be a huge blow to the company. Honestly, how many times have you heard of a businessman announcing a retirement--let alone a partial retirement--two years in advance?

Frankly, Microsoft needs a more dramatic overhaul. Many of the company's top lieutenants, including CEO Steve Ballmer, are Gates's cronies and have been in positions of power for years thanks to their relationship with Gates. The company's stock price hasn't moved in years, the company is unable to ship major new product versions, and its new business opportunities are all pretty much floundering. Microsoft makes virtually all of its profits on Windows, Office, and its server products. That's almost exactly the product mix the company made most of its money on a decade ago, although server sales have risen dramatically. But why wouldn't they? PC-based servers are a natural extension of the PC market. Microsoft has failed to make major inroads in any business market where it can't leverage its existing monopolies with a chain of partners that includes PC makers and application developers.

And you know what? Gates's departure changes none of this. The company will continue to struggle in new markets against companies such as Google, Nokia, and Sony, just as it has done over the last couple of years. It will continue to sell many of copies of Windows, Office, and Windows Server, as always. If Gates were a true visionary, he would admit to the company's problems and shake its very foundations, giving its employees, shareholders, and customers a real future. But the truth is, Microsoft is just shuffling executives around. And that won't cure any of the company's real problems.