Gates will still pull the strings

Anyone who believes Bill Gates is going to sit quietly coding as he steps back from the helm of Microsoft, is wrong. It's not as if he coded very much in the early days, and he certainly didn't develop Dos.

In promoting his friend and partner Steve Ballmer to CEO and stepping back to become 'chief software architect', Gates is not preparing himself for a quiet old age. He is helping position Microsoft to tackle a number of contentious issues and redefine itself for the 21st century.

Playing for time
After years of being the big kid on the block, Microsoft is suddenly faced with serious competition including AOL, Yahoo and Amazon. They have plenty of cash to spend, and imaginative leaders who understand the Internet. They recognise the business is not about software. It's about content and the Internet. AOL's acquisition of Time has proved the playing field is changing.

Gates recognises this. While announcing Ballmer's elevation to CEO, Gates said: "These are dramatic times in our industry. As we look ahead, we recognise that we must refocus and reallocate our resources and talents. I've been doing the same job for 25 years."

"We achieved a lot of dreams, we today we can see there are more opportunities than ever. I think it's fair to say we haven't seen anything yet."

Gates has to now stimulate the perception that Microsoft has lots of ideas and ventures. This is a role best pursued from behind the smokescreen of a vague new title.

The Midas touch
Gates represents the Midas touch. Whether he's a genius or just a brilliant business strategist, he can always surround himself with extremely bright people - and some of it will rub off.

Industry analyst Dr Simon Moores, head of The Research Group, said: "For the first time Microsoft has to be imaginative in the face of competition. Its technologies have never been particularly innovative but it has always been a supreme improver. Microsoft is a great software company but the sands are shifting."

The other major problem facing Microsoft is that it has to prepare itself to get the best possible outcome from its trial with the US Department of Justice. This means either avoiding being broken up, or being organised properly to operate as two or three units - Gates could head up one half, Microsoft New Media, say, and Ballmer the other.

Under Gates' direction, mediation with the DoJ has been difficult. He doesn't even like Microsoft's head lawyer, Bill Neukom.

Moores said: "Gates isn't someone the DoJ feels comfortable mediating with. He's antagonistic, aggressive and competitive. Ballmer is the more affable and political face of Microsoft."

Breaking up is hard to do
But though Microsoft doesn't seem keen on making an out of court settlement, Ballmer is not keen on a break-up situation.

On his ascension to CEO, he said: "It would be reckless and irresponsible for anyone to try and break up this company. It would be unprecedented, and I think it would be the greatest disservice that anybody could do to consumers in this country."

Gates echoed this: "I think it would be reckless beyond belief."

Job satisfaction
The tale that Gates is looking for a quiet life just doesn't add up. Analyst Rob Enderle of Giga Information Group said: "It's been clear for a while that he [Gates] was not enjoying his job. Steve has really been the driving force inside the company anyway - he likes people and he's very gregarious. Bill isn't. This lets him phase his way out at a time when the company is on top."

This may be true, but it doesn't mean Gates is going out to pasture. The AOL/Time deal proved that virtual companies could buy bricks and mortar, and fuelled speculation that Microsoft and Disney would be a good fit.

This kind of deal would be something for Gates to get his teeth into, rather than banging out some very simple code for very small machines.

Robin Bloor, head of Bloor Research, summed it up: "He's not going to be any less influential in how Microsoft is run. When he goes abroad, he'll still meet Tony Blair."