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Ozzie’s Departure Fuels Concern About Microsoft Bench

Ray Ozzie, former chief software architect at Microsoft Corp. Photographer: Jonathan Alcorn/Bloomberg News
Ray Ozzie, former chief software architect at Microsoft Corp. Photographer: Jonathan Alcorn/Bloomberg News

Oct. 19 (Bloomberg) -- The departure of Ray Ozzie as Microsoft Corp.’s chief software architect fueled concern that Chief Executive Officer Steve Ballmer may not be doing enough to nurture would-be successors and executives who can set strategy.

Ozzie, 54, joined the company in 2005 and was later named as one of the two executives who would chart vision as co-Founder Bill Gates stepped away from day-to-day operations.

Microsoft announced the resignation of entertainment chief Robbie Bach in May, and Office division head Stephen Elop left last month to become CEO of Nokia Oyj. Ballmer needs to show he has a deep bench of up-and-coming executives who can help him plan for the long term or run Microsoft in his absence, said Michael Gartenberg, an analyst at Gartner Inc.

“When multiple people depart from a given manager, at a certain point it raises questions on the manager,” said Gartenberg, who is based in Teaneck, New Jersey. “Once again, there’s an empty seat at Ballmer’s table.”

Ozzie won’t be replaced because the company has enough leaders in place, Ballmer said yesterday in an e-mail on the company’s website. Ozzie will be “on board” for a while before leaving, Ballmer said.

Microsoft fell 72 cents, or 2.8 percent, to $25.10 at 4 p.m. New York time in Nasdaq Stock Market trading.

With Ozzie gone, Microsoft Chief Research and Strategy Officer Craig Mundie will probably take a more significant role in planning technology strategy for the future, Gartenberg said. Plans for many of Microsoft’s products are also increasingly laid by individual business groups, and executives such as Steve Sinofsky, president of the Windows division.

Ozzie’s Legacy

Earlier this month, Ballmer named Kurt DelBene to replace Elop. Andy Lees was named president for mobile and Don Mattrick for entertainment, replacing Bach. The quality of the executives reporting to Ballmer varies, said David Smith, also an analyst at Gartner, which is based in Stamford, Connecticut.

Ozzie took the lead in pushing Microsoft into Internet-based software. In a 2005 memo, he told executives the company needs to respond to the shift or “our business as we know it is at risk.”

Ozzie has played a less prominent role more recently. He didn’t speak to analysts and investors at the company’s annual analyst meeting in July, for example.

His departure didn’t surprise some analysts.

“I don’t think it’s going to have a huge impact,” Smith said. “He was trying to fill some pretty big shoes -- you don’t just walk in and become the next Bill Gates.”

Brain Drain

Microsoft has faced concerns of brain drain before. In 1999 and 2000, it lost Paul Maritz, who had been the No. 3 executive at the company; Brad Silverberg, who led development of Windows 95 and Internet Explorer; and Nathan Myhrvold, the company’s chief technology officer.

Ozzie, who had done much of his work in smaller companies, may have found it difficult to exert influence at Microsoft, said Paul Saffo, a managing director at Discern Inc., a San Francisco-based investment research firm.

Ozzie is best-known as the creator of the Lotus Notes e-mail program in the 1980s. He was among a small group of outsiders to whom Gates gave a copy of the top-secret source code for the first version of Windows to get his feedback.

He joined Microsoft when the software maker acquired his company, Groove Networks Inc. Gates and Ballmer said they had been trying to hire Ozzie for more than two decades.

‘Cultural Mismatch’

The pairing was a “cultural mismatch,” Saffo said, because Ozzie was used to trying out ideas quickly and cutting his losses if it didn’t work, a tall order at Microsoft.

“I was surprised he went to Microsoft,” said Saffo, who has known Ozzie since the 1980s. “I was surprised he stayed as a long as he did. I’m not surprised that eventually there was organ rejection here.”

Saffo said Ozzie leaves behind important accomplishments, including getting the company to pursue so-called cloud computing, which involves delivering software and computing capabilities via the Internet.

In 2008, he unveiled Microsoft’s Azure cloud software for storing and running customers’ programs in Microsoft’s own data centers. With the work on Azure shifted to Microsoft’s server and tools business, under President Bob Muglia, Ozzie may have found his work at Microsoft was done.

“What else is he going to do?” said Dan Warmenhoven, chairman of NetApp Inc. “He’s smart as hell, but he’s not really a businessman. He’s a technologist. He’s probably looking for the next big thing, and didn’t see it there.”

To contact the reporter on this story: Dina Bass in Seattle at

To contact the editor responsible for this story: Tom Giles at

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