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Originally published January 31, 2014 at 7:45 PM | Page modified February 1, 2014 at 8:53 PM

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Troubling tilt on Microsoft board if Bill Gates isn’t chairman

A Microsoft executive may be the next CEO of the company, but of more concern are reports that the board is considering replacing Gates as chairman.


Seattle Times technology columnist

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If the whispers are correct and Satya Nadella becomes Microsoft’s next chief executive, that’s great news for the company and a Puget Sound region dependent on the software giant’s ongoing success.

Nadella, the India-born head of Microsoft’s thriving cloud and enterprise software business, is a natural choice to replace Steve Ballmer and guide the global company through what’s sure to be a turbulent next decade.

Of greater concern is the accompanying news that Bill Gates may step down as chairman of Microsoft’s board of directors and perhaps serve as a sort of technical adviser to Nadella.

A Bloomberg report Thursday suggested that Gates may be replaced on the board by John Thompson, a former Microsoft rival who has become an unusually vocal member of its board since he joined in 2012.

Then on Friday, The Wall Street Journal said Gates may shift into a role advising Nadella.

That would be a historic move. Among the extraordinary group of entrepreneurs that launched the PC revolution in the 1970s and transformed the world, Gates is the last one still leading his company.

Times change, and the world would probably be a better place if Gates spent less time with Microsoft and more time battling disease and poverty through the Bill & Melinda Gates Foundation.

But I wonder how the Greater Seattle area will fare over time, as Gates winds down his role at Microsoft and eventually moves on.

If Gates and Ballmer step aside as part of the executive shuffling, the region that spawned Microsoft and nourished its growth into the world’s largest software company will no longer have a strong, local voice on the board.

Instead, the board could end up being led by Thompson, a longtime Silicon Valley tech leader who spent most of his career competing with Microsoft.

Nadella or whoever becomes chief executive will have a seat, but it won’t be the same. They’ll be a “new hire” reporting to the board without the authority of Gates and Ballmer, the company’s original business leaders and largest individual shareholders.

Without Gates and Ballmer, the new chief executive will be the only board member who lives here.

When Microsoft was in its heyday and going through its fastest period of growth, in the mid-1990s, more than half the board members lived in the area.

On the present board, everyone but Gates and Ballmer is from out of state — mostly from California. The closest member may be David Marquardt, a Silicon Valley investor who was one of Microsoft’s first backers and joined its first board, in 1981.

Others include former executives at AT&T, BMW and JPMorgan Chase.

The lack of local representation may seem like no big deal. Microsoft is now a global company and the various board members offer different perspectives.

But it won’t be long before there’s another call to break Microsoft into pieces. Impatient investors continually badger the company to spin off divisions for a quick profit, especially when Microsoft is under the most pressure, at low points in its business cycles.

At a minimum there will eventually be more layoffs and restructuring. The first round is likely to come this year, after Microsoft completes its acquisition of Nokia’s 32,000-employee phone business.

Facing these challenges in the past, Microsoft gave priority to its Redmond-based workers. Like fellow native Costco, it has resisted calls to slash costs and boost shareholder returns, and taken a broader view of its responsibilities as a corporate citizen.

The biggest example is probably the $1 billion campus expansion project that Microsoft announced in 2006, just before the economy slowed. Instead of shelving the project, it continued building on both sides of Highway 520 and then expanded in downtown Bellevue and Seattle as well.

Among the areas that Microsoft invested in during this period was security software, including new products that competed with the offerings of Symantec, a California security vendor that Thompson led for 10 years.

Thompson expanded Symantec into a big, diversified software company, but by 2007 it had other challenges besides Microsoft, including overhang from a costly acquisition. Thompson began major layoffs and cost cutting in 2007, then announced his retirement in 2008.

Before leading Symantec, Thompson was a longtime IBM employee who led its personal software group — when Microsoft was pushing its way into enterprise software — and eventually became general manager, IBM Americas. Thompson helped IBM chief Lou Gerstner revitalize the storied company and win back Wall Street’s love, but it was a painful process that started with the loss of more than 100,000 jobs.

I’ve thought all along that Nadella would eventually lead Microsoft, but the board might try to find a more seasoned executive to mentor him for a while. The Journal story Friday said Nadella wants Gates to fill that role.

Another mentor could be Thompson, who has seen it all from the other side of the fence and is now leading the search for Microsoft’s new chief executive.

They could be a formidable team.

Still, I wonder how a Thompson-led board would balance the inevitable calls to “enhance shareholder value” with Microsoft’s expansive vision and the big, expensive, long-term bets it must place to change the world over and over again. Those bets can add thousands of jobs in the greater Redmond area, fill new buildings and generate even more jobs in related companies.

Who on the board will stand up for Microsoft’s continuing growth at home and keep the pedal down, even when the road ahead is bumpy and unclear? Who will push Microsoft to fight for every possible bit of the world market for computing?

Nadella, perhaps. But any incoming chief executive will be wary of being seen as a spendthrift. Then there’s the challenge of being a rookie on a board full of people hailing from California, the epicenter of anti-Microsoft sentiment.

Thompson’s peers in California will no doubt cheer his accomplishments in two years on Microsoft’s board.

First Ballmer was ousted. Now, Thompson apparently is leading a restructuring that would install a chief executive indebted to him — a longtime Microsoft rival in Silicon Valley — while finally removing Gates as chairman.

There’s a lot of work to be done in Redmond. Tell Thompson we’d love to have him move on up.

Brier Dudley’: 206-515-5687 or bdudley@seattletimes.com



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About Brier Dudley

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.
bdudley@seattletimes.com | 206-515-5687

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