Gates Returns To His Microsoft Roots -- He's Going To Concentrate On Products, Not Public Relations

Bill Gates' appointment of longtime friend and confidant Steve Ballmer as president of Microsoft marks a return to company roots for both senior executives.

Gates said he wants to return to the product side of Microsoft, which he, Paul Allen and Harvard colleague Monte Davidoff started 23 years ago by authoring a version of the BASIC programming language for the first mass-marketed personal computer.

Ballmer, who had been executive vice president for sales and support, will assume more day-to-day operational oversight, similar to the responsibilities he had when he started work at Microsoft as operations chief and the company's 28th employee in June 1980.

In making the moves, Gates may indirectly have been signaling that addressing design shortcomings, software bugs and customer satisfaction is a more pressing calling for himself than the public-relations role he has spent much of his recent time playing.

The changes come at a crucial time for Microsoft, which is facing a federal antitrust lawsuit focusing on its business practices, increasing competition and rapid changes in the market for computer software as the Internet grows in importance.

Throughout the 1990s, Gates has spent much of his time articulating his vision not just for Microsoft but for the personal-computer industry. His 1995 book, "The Road Ahead," laid out his concept of a future digital society, and in countless public appearances he has talked about everything from "wallet PCs" to powerful desktop computers that hear and think. Now much of that vision is coming to fruition. But challenges abound.

Complaints about flaws

Some consumers are complaining on Internet mailing lists about flaws in Microsoft products that should have been fixed before products were shipped. There's criticism that products are not working together as well as they used to, and it is Microsoft's responsibility as an industry leader to ensure that they do.

Windows 98, the latest update of the operating system that runs 90 percent of the world's personal computers - though selling faster than expected - has evoked controversy over bugs and installation problems. Some computer-makers have posted warnings about it on their Web sites.

Windows NT 5.0, a much-anticipated upgrade of the operating system that runs large, networked computers for businesses, has been delayed repeatedly while testers try to iron out performance issues.

In Microsoft's formative years, Gates often stepped in during the testing process and offered pointed suggestions about program code or design shortcomings.

In recent years, Gates has continued to do product reviews, but without the intensity and thoroughness of his earlier role.

Microsoft also has been criticized for recognizing the potential business of the Internet significantly later than competitors such as Netscape.

"Bill Gates woke up to the fact that while he was focused on the business, he almost missed a rapid technological change," said Sanjiv Hingorani, an analyst with ING Baring Furman Selz.

Focusing on products and the future is what Gates likes most and does best. "It's going back to his roots," Hingorani said.

Microsoft has not had a president since 1992, when former Boeing executive Mike Hallman resigned, and Gates appointed a three-member Office of the President.

Gates bordered on effusive yesterday as he discussed his redefined role at the company.

"I'm very excited about my job and, if anything, this makes it even more attractive," Gates said.

Freeing Gates to work more with product development is the latest in a long line of assists Ballmer has provided his boss.

As a big man on campus at Harvard University in 1975, Ballmer might have been expected to select his close friends from the sports and literary circles he pursued.

Instead, Ballmer, who managed the football team, sold ads for the student newspaper and edited the campus literary magazine, hooked up with a reclusive, poker-playing computer whiz who shared Ballmer's movie and music tastes as well as his aptitude for math and economics.

Got books in order

Ballmer's first job at Microsoft was to get the books in order and set management goals. Soon, he began to hire at a rate Gates feared would bankrupt the company. But in the end, his organizational skills enabled Microsoft to rapidly grow through the early 1980s.

When Gates named the 42-year-old father of two, basketball fan and No. 1 in-house cheerleader president yesterday, it was the latest acknowledgement of their close relationship, as well as Ballmer's profound impact on the company.

In industry circles, Ballmer is famous for the enthusiasm and acumen he brings to the negotiating table.

"Steve is passionate about what he does to the Nth degree," said Jay Amato, chief executive of Vanstar, which supplies networking services to large corporations and institutions. "There's all the stories about him being a wild man and stuff, but at the end of the day he does listen to what people tell him. And if he thinks they're right, he'll change his mind."

Bull-necked and boisterous, the Detroit native is blessed with superhuman energy and a powerful set of vocal cords, which he overused to the point of requiring surgery on a trip to Japan in 1991. His foghorn voice and manic mannerisms, such as swinging bats or bouncing a basketball while conducting sales meetings, have led to a stockpile of Ballmer lore.

His aggressive stance paid unparalleled dividends for Microsoft throughout the 1990s. A series of Ballmer-instigated changes has taken the company from a desktop software-maker to an Internet and corporate networking powerhouse.

Helped create `the new IBM'

By building a robust sales force around the next-generation Windows operating system, NT, Ballmer has built the company into a large-enterprise software supplier observers have labeled "the new IBM."

Known for a persuasiveness that can border on intimidation, Ballmer's aggressive pursuit of corporate customers on behalf of Microsoft's browser, Internet Explorer, became a lightning rod for government antitrust concerns last fall that resulted in a lawsuit against the company by the U.S. Justice Department and 20 states. Initially combative, Ballmer retracted a "to heck with Janet Reno" comment and tempered his "we will not negotiate" stance as time passed and Microsoft drew criticism for poor public relations.

As much as investors, customers and employees have viewed Ballmer as the second-in-command, he insists the promotion is more than just a formality. He gives up some responsibility on the sales and support side and adds a significant amount of overall business management to his duties.

"I have a different job," Ballmer said yesterday.

On the Microsoft campus, Ballmer is as well-known as Gates, albeit in a different way.

"Whereas Bill has this awesome presence in terms of people's respect for him, Steve is your friend," said Deborah Willingham, who heads Microsoft's enterprise customer unit. "You feel like you know him; he's a regular guy."

A former Microsoft executive once called Gates the head and Ballmer the soul of Microsoft.

"Without Steve, Microsoft would be a different company," said Jeff Raikes, a senior Microsoft executive, in a January interview. At a Microsoft sales meeting last year, Raikes stepped in to run several sessions while Ballmer attended his mother's funeral. When Ballmer showed up for the final day's session, he received a standing ovation from the crowd of 1,100.

Ballmer was so overcome he had to wait several moments before taking the podium.

"It was a moving moment for him," said Raikes.