Microsoft's Gates says to reduce role in 2008

REDMOND, Washington, June 16 (Reuters) Microsoft Corp. founder Bill Gates said on Thursday that over the next two years he will ease out of a day-to-day role at the company he built into the world's biggest software maker.

His decision to step down immediately as chief software architect and to relinquish all managerial roles in July 2008 comes at a time when Microsoft, whose Windows operating system runs an estimated 90 percent of the world's personal computers, is struggling to find new sources of growth.

Gates, 50, passed the technical mantle to Ray Ozzie, creator of the Lotus Notes e-mail program. Ozzie, who joined Microsoft last year, is at the heart of Microsoft's push to transform software into a service and maintain its market dominance.

By July 2008, Gates will work for the Bill and Melinda Gates Foundation he has funded with his software billions to promote health and education projects around the world. He will remain as Microsoft's chairman and an advisor on key development projects.

''Obviously, this decision was a very hard one for me to make,'' Gates told a news conference. ''The change we're seeing today is not a retirement, it's a reordering of my priorities.'' Few expected the news would affect Microsoft's operations.

Gates began taking less of a role with the company when he handed the chief executive reins to long-time deputy Steve Ballmer in January 2000.

''Bill Gates may step away from day-to-day responsibility but he will never, ever step away from Microsoft,'' said Anthony Sabino, professor of business at St. John's University.

Microsoft's stock has stagnated for several years as investors question its ability to find new growth markets.

Microsoft has been trying to respond to threats from companies such as Google Inc., which is using its dominance in Internet search to offer a range of other services and products, such as Web e-mail and spreadsheets.

''I bet to a certain degree he (Gates) might be getting tired of beating his head against the wall and trying to find other profitable revenue streams besides their Windows operating systems,'' said Shannon Reid, manager of Evergreen Strategic Growth Fund, which owns Microsoft shares.

At the same news conference as Gates, Ballmer, 50, spoke with his usual confidence and enthusiasm, saying Microsoft aimed to add another 1 billion customers in the next decade.

''We're really also announcing the transition we're making as a company to reach the next level of success and meet the needs of a world hungry for new technology,'' Ballmer said.

''We will continue his vision of thinking big and executing even bigger.'' Shares in Microsoft rose 0.9 percent to close at .07 on the Nasdaq. The stock fell 10 cents in extended trading on the Inet electronic brokerage after Gates' announcement.

Gates said Ozzie -- whose Lotus Notes was one of the first popular corporate e-mail programs and is now sold by IBM -- will replace him as chief software architect.

Ozzie, 50, joined Microsoft last year as one of three chief technical officers after it bought his Groove Networks start-up focusing on collaborative software.

Craig Mundie, 56, another chief technical officer, will take the new title of chief research and strategy officer.

REUTERS DH RAI0559