Gates shocked the technology world in 2000 with a surprise announcement that he would hand over the CEO role to Ballmer but remain as chairman. At the time, Gates also took on a new role as chief software architect.
In recent months, Gates and Ballmer have been planning for the company's founder to step back further. The company began making plans in earnest at a board retreat in March. At that time, the directors made plans to discuss the subject on a mid-June conference call.
Gates, Ballmer and the rest of Microsoft's directors finalized plans on a conference call Tuesday. However, the topic had been on both leaders' minds for some time, including when Microsoft made the decision to acquire Ozzie's Groove Networks back in 2005.
"Certainly Bill and I had begun that discussion," Ballmer said at the press conference.
While Microsoft continues to perform well financially--it pockets nearly US$1 billion per month on quarterly sales of about US$11 billion--the company's growth prospects and ability to compete with a new breed of competitors has caused its stock price to stagnate. Shares closed at US$22.07 Thursday in regular trading, down from a 52-week high of US$28.38. Shares have slipped steadily since trading at about US$35 in 2001. (Following the announcement on Gates' plans, shares slipped about 8 cents Thursday.)
Gates, 50, founded Microsoft in 1975 with high-school buddy Paul Allen to sell a version of the Basic programming language for the Altair computer. The company had considerable success in the 1980s, partly as a creator of software applications for Apple Computer's Macintosh computer.
But it was the company's decision to enter the operating system business that would propel it to the top of the technology world. The company's Windows OS runs on more than 90 percent of the world's PCs. The success briefly pushed Gates' net worth, largely through his Microsoft holdings, past US$100 billion in 1999. Gates currently holds about 977 million shares.
According to Forbes magazine, he is the richest person in the world with a net worth of US$50 billion in 2005.
"Gates certainly has been a driving force in the industry, for better and for worse. I think if you go back to 1981, few would have predicted the degree to which one OS would unite 95 percent of the PCs around the world," said Nathan Brookwood, an analyst with Insight 64.
"As Microsoft has grown, (Gates') ability to contribute at a technical level has become ever less critical to the company's success. I would suspect it won't be very different from a technical standpoint with him not involved on a full-time basis," Brookwood said.
"He was really the first technology-oriented entrepreneur who was also a great businessman," wrote Stephen Baker, an analyst with NPD Techworld, in an e-mail interview. "(He) kind of legitimized the idea that techies could make money and it was OK."
Gates put business success ahead of pure technology concerns when it came to his company, which probably accounts for some of the backlash against him and Microsoft from the technology community over the years, Baker wrote. "I think if you look at Google today, they are running into the same headwind, admired entrepreneurs doing good things technologically but now being challenged by needing to balance making money and building products."
And former Microsoft chief scientist Myhvold said that even after Gates is no longer roaming the halls daily, the company "has got tremendous opportunities ahead of it. Look at how dynamic IBM has remained."
CNET News.com's Scott Ard reported from San Francisco, and Ina Fried reported from Redmond, Wash.
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