Ballmer to Retire in 10 Years; Looks Back on Happy, Rocky Relationship With Gates

With Ballmer's new announcement that he will retire within 10 years and Gates' retirement this year, its worth a look at the pair's past, present, and future.

Microsoft has owned the privilege of being the world's largest software company for well over a decade and it has strong executive leadership to thank for that, largely. Love them or hate them, Microsoft's founder and current Chairman Bill Gates and CEO Steve Ballmer, a key Microsoft veteran, have shaped the face and course of Microsoft and the tech industry as a whole.

When Gates stepped down as CEO in 2000 allowing Ballmer to step up, it was a historic moment for the company. That moment is nearing its finale this year, with Gates finally looking to fully retire. And as the future fast approaches, Ballmer just announced that he will follow Gates into retirement in just 10 years time or less.

With the departure of Gates and looking forward to the departure of Ballmer, it’s worth taking a look at how Microsoft has been shaped by the pair’s relationship – one that Ballmer once emotively compared to a marriage which produced many children. The Wall Street Journal provides inside insight into internal dealings that took place during the Gates-Ballmer transition and how their relationship survived its rockiest days.

Gates and Ballmer's story does not start with Microsoft; rather it begins far before that. They first met at Harvard University in the mid-1970s. They were the same age (both are now 52) and they shared a love for poker and intellectual challenges. One fond memory they hold is when they failed to attend a single economics class session, but through collaborative cramming managed to score near perfect marks -- 97 percent for Ballmer and 99 percent for Gates.

The scores were reflective of the pair’s early relationship and work at Microsoft. Both shared almost equal duties, but Gates always owned the dominant position by a hair. Gates took on the role of providing the chief software and business direction, while Ballmer filled in for other necessary top duties. There was no part of the business that the pair couldn't manage. Gates describes the time stating, "For a certain size organization, it was beautiful."

Like most pairs, the two had their share of heated arguments and fights, but they would quickly make up -- and get back to work. In the 90s Microsoft was forced to restructure, following government charges of monopoly and the threat of the burgeoning online industry. This culminated with Gates announcing Ballmer would replace him as CEO in 2000 and that he would begin the transition into retirement.

Bill Gates assumed the role of "Chief Software Architect" -- a role that was beneath Ballmer's. Gates, however, still thought of himself as top dog, and according to his own omission would offer sarcasm in important meetings, undermining Ballmer's leadership. Everything from personnel staffing to the Xbox to Windows itself became a battleground for the power struggle in which Gates refused to accept his subordinate role. The clashes had many casualties, among them the eventually defunct NetDocs program; elements of which survived to be incorporated into the Office program.

In 2001, the board and senior executives intervened, calling Gates and Ballmer into a meeting about the destructive effect their relationship was having. Jon Shirley, a former Microsoft president states, "The board was really concerned about what was going to happen."

In February 2001, perhaps the most important meeting in Microsoft's history took place at the Polaris restaurant in the Bellevue Club Hotel a few miles from Microsoft's campus. Gates and Ballmer have never revealed the details of this meeting, so the world may never know, but the overall gist was to establish Mr. Gates as the "junior partner" to Mr. Ballmer's "senior partner."

Ballmer pledged to learn when to override Gates and when to "let things go". He stated that after the meeting, "We got it figured out."

Meanwhile Gates began to defer to Ballmer to the shock of many. Microsoft Vice President Mich Matthews recalls executives exchanging bewildered glances during such an instance in an important meeting. Gates says he needed to do most of the changing. He stated, "Steve is all about being on the team, and being committed to the mutual goals. So I had to figure out, what are my behaviors that don't reinforce that? What is it about sarcasm in a meeting? Or just going, 'This is completely screwed up'?"

The result was an enriched Microsoft. Ballmer kept the technical savvy, but moved towards a model in which the executives took a greater managerial role, as opposed to being involved greatly in tech development. Surprising to some, despite his reputation for ebullience he did a commendable job making peace with various regulators and patent disputes.

In recent years, despite its troubles, Microsoft has had its share of shining success, such as Windows XP, and its modest ones, such as the Xbox program. And after surviving their greatest trial, Gates and Ballmer became incredibly close once again, so much so that they would at times complete each other's sentences. In a recent interview Ballmer, teared up, discussing the creation of Microsoft.

He reminisced, "It is a little like giving birth to something. Bill gave birth but I was kind of an early nanny in raising this child. There are fun things we get to do together, that's all nice. I mean, it's important, but this is..."

"...this is what we did," Gates added grinning, a bit misty-eyed himself.

Doubts remain. Gates delivered his last major speech to employees and customers this week, and will now be semi-retired. However, some think that if Microsoft enters a crisis, such as failing to rebound from the Vista slump, Gates won't be able to resist the temptation of a second coming with the company, much like Apple's Steve Jobs. Others are concerned about Microsoft's future because they say that neither Ballmer nor Gates can offer the young blood needed to solve such a crisis.

And there's Ballmer's upcoming retirement, which he just announced. In an interview, Ballmer commented that he would stay with Microsoft "for another nine or 10 years ... until my last kid goes away to college." While this may seem like a long time, decades have a habit of quickly slipping by amidst the unfaltering passage of time. Microsoft's brass are aware and Ballmer's announcement leaves many pondering what will become of Microsoft in a post-Gates and then in a post-Ballmer-Gates era.

One possibility for Ballmer's replacement is Lotus Notes founder and current Microsoft chief tech visionary Ray Ozzie, whom Gates once described as "one of the top five programmers in the universe." Ozzie is replacing Gates in much of his roles he's held since stepping down as CEO. Moving up to the CEO position would not be an unmanageable transition. However, Ozzie is almost the same age as Ballmer and Gates, so he make look to retire himself.

If Ozzie does retire, the future for Microsoft really is a mystery and wide open. Much of the company's budding and veteran leadership -- Joanne Bradford, Rob Short, Jeff Raikes, and Bruce Jaffe to name a few -- has left either to manage elsewhere or to the greener pastures of retirement.

There is much uncertainty with Gates leaving and now with Ballmer's own retirement clock ticking. However, whatever the future may hold for Microsoft, it is truly salient to look at the indelible mark that the relationship between Ballmer and Gates -- rocky at times, warm at others -- left on both the field of electronics and the economy in general in the last two decades.