Bill Gates steps aside as chairman, becomes Nadella's consigliore

Microsoft co-founder Bill Gates will step down as chairman of the board to spend his time with the company advising the new CEO, Satya Nadella.

The change is historic. "This is a milestone, an indication of not only a changing of the guard in Microsoft, but also a change in the technology business between the past and the future," said Patrick Moorhead, principal analyst at Moor Insights & Strategy. Gates has been Microsoft's one and only chairman.

"The past means software on PCs, the future is about mobile devices where most of the processing is happening in the cloud, and where the client moves to online app stores," Moorhead explained.

Gates' new title will be Founder and Technology Advisor, and he will remain on the board of directors, Microsoft said. In his place as chairman, Microsoft has selected John Thompson, a former CEO of security firm Symantec and the director who led the CEO-search committee. Thompson joined the board two years ago.

"[Gates] will devote more time to the company, supporting Nadella in shaping technology and product direction," Microsoft said in a statement.

"Gates is key," asserted Ted Schadler, an analyst at Forrester Research. "The two [Nadella and Gates] go together. The timing is not a coincidence."

The move doesn't mean that Gates is returning full-time, but he will be significantly increasing his involvement.

"I'm thrilled that Satya's asked me to step up, substantially increasing the time that I spend with the company," Gates said in a short video Microsoft posted on its website. "I'll have over a third of my time available to meet with product groups. And it will be fun to define this next round of products, working together."

Moorhead applauded the mentor's role that Gates will play.

"It's a really good move," said Moorhead. "It would be a very bad choice to push [Gates] out completely.... He's an icon and a really, really smart person. This is a really good role for him."

Early in the hunt for a new chief executives, some pundits called for Gates' prodigal return to the company, a move Gates repeatedly spurned. In an interview two weeks ago, Gates again said his focus would remain on his philanthropic work with the Bill & Melinda Gates Foundation. "My full-time work will be the foundation for the rest of my life," Gates said then. "I'm not going to change, although I'll help out [at Microsoft] part time."

By assisting Nadella, who was named CEO today, Gates will fulfill that promise.

Gates, 58, has been Microsoft's sole chairman since its birth 39 years ago. He co-founded the company with Paul Allen, who left the firm in 2000, and is now best known as the owner of the Seattle Seahawks. The Seahawks won the Super Bowl on Sunday, beating the Denver Broncos 43-8, for the team's first Vince Lombardi Trophy.

According to reports last year, some of Microsoft's biggest investors had called on the board to boot Gates from the chairman's spot. They worried he would prevent the board from making the drastic changes they believed were necessary and handcuff the new CEO to the in-place strategy.

They got their wish, but not in the order they had hoped.

Gates' departure from the chairmanship was inevitable at some point. While he may be an iconic figure from technology's past, he has been regularly selling his Microsoft stock for years. At his current selling pace of approximately 80 million shares annually, Gates will lose his biggest-shareholder spot before June. At that point, Ballmer will become the largest individual investor in the company, holding about 4% of the outstanding shares.

Ballmer will remain on the Microsoft board, the company said.

Gates' new role wasn't completely clear, including how important his opinions will be at Microsoft, but analysts liked the general idea of him hanging around.

"Think about Nadella, he's never run a big company," said Schadler. "He needs coaching from the board and the continuity of the current leadership to be credible. Gates can help him in talking to investors and setting strategy. And by keeping Gates, Nadella keeps Ballmer and the board on his side."

Moorhead disagreed, saying that while Gates was "at his core a product guy," Nadella would turn to Thompson for the kind of coaching Schadler mentioned.

Nor is Gates suitable as Nadella's consumer sidekick, a position that Moorhead said is crucial to the company, which stockpiles billions from sales to enterprises but has whiffed on its consumer strategies. "Nadella will need to be augmented by someone with a lot of consumer experience and success," Moorhead said earlier today.

That's not Gates. "I don't think that Gates is Nadella's right-hand person for consumer," Moorhead said. "I think Microsoft needs someone from outside, an Apple or Google or Samsung, there. Gates was at the helm [as either CEO or chairman] for the things in consumer that Microsoft didn't make traction in."

Moorhead believed that while Microsoft's consumer initiatives -- Windows 8, say -- were done well, their pace was too slow to reverse the receding tide. That was the main reason why Ballmer was pushed out, according to reports last year that quoted Thompson.

"Gates will be Nadella's consigliore," Moorhead said, using the label for an organized crime boss's counselor. "He'll be Nadella's advice guy. But Thompson is his boss."

For his part, Gates welcomed Nadella to the small family of Microsoft CEOs. "Satya's got the right background to lead the company during this era," Gates said.

Ballmer, too, praised his replacement. "He's a proven leader ... and perhaps more important, almost, is a remarkable ability to see opportunities in the marketplace, to see the landscape, and then to understand how we can collaborate and execute against those here at Microsoft," said Ballmer in a separate video.

"I have absolutely no doubt that Microsoft is in good hands," Ballmer said.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

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