Bill Gates leaves an enormous legacy but an uncertain future

As Bill Gates leaves full-time work as chairman of Microsoft today, he can look back on one of the most extraordinary careers in the annals of business -- a rise from college dropout to world's wealthiest individual. Along the way, his forceful execution fulfilled the audacious goal of putting a computer in nearly every home, at least in the U.S.

But the company Gates leaves behind is, at long last, floundering. Its stock price is where it was six years ago. Microsoft has just bungled an attempt to buy Yahoo in what would have been the largest acquisition in Silicon Valley history. And the attention of the technology world, once riveted on the Redmond, Wash., company, has turned elsewhere, to Google and beyond.

Perhaps most surprising, Microsoft appears to be losing ground on the one product that it rode to world dominance: the operating system powering 9 in 10 personal computers.

By coincidence, today also marks the last day of general availability of Windows XP, the operating system that Microsoft finally got right. Its successor, Windows Vista, is so unworthy that even Microsoft's closest partner, top chip maker Intel, is refusing to distribute it to employees.

What do you think? If Gates went wrong, where? Will Microsoft ever command the technology industry again?

-- Joseph Menn

Photo: Bill Gates in 1990. Credit: Marty Lederhandler / Associated Press

Coming soon: .everythingyoucanthinkof

UPDATE: Here's a more detailed version of this story from the paper.

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Ushering in the most dramatic expansion of virtual real estate in 40 years, the group controlling Web addresses said today that pretty much anyone would get a shot at buying a top-level domain to go along with the current crop, which includes .com and .net.

The Internet Corp. for Assigned Names & Numbers, which is as close as the Internet gets to a governing body, opted to open up the process to companies, individuals and coalitions. That means that any word or name approved by ICANN could conceivably follow the dot in a Web address. Get ready for .pickles and .google.

"The potential here is huge. It represents a whole new way for people to express themselves on the Net," ICANN Chief Executive Paul Twomey said in a news release issued from the group's Paris meeting. New domains could be forthcoming next year, after another round of refinements and the first applications.

"There are already interested consortiums wanting to establish city-based top level domain, like .nyc (for New York City), .berlin and .paris," ICANN said in the release.

The decision stems from ICANN's philosophy of keeping as little power for itself as possible, as well as from lobbying by the companies that dole out domain names. Those companies, including some in Los Angeles, see a potential windfall in administering new top-level domains and selling off individual addresses.

But not everyone was thrilled with the step. Critics warn that scammers will rush in, grabbing up trademarked names or misspelled versions of those names and then taking their chances in court.

"Google doesn't want a scam artist running Google.whatever," said tech policy consultant Lauren Weinstein, co-founder of the nonprofit People For Internet Responsibility. "It's almost like an extortion racket -- you'd better buy your name in this new top-level domain or you're going to get blamed."

"The process has been hijacked to a significant extent by folks who see the domain-name system as their personal piggy bank."

-- Joseph Menn

Image courtesy of ICANN

Microsoft still not buying Yahoo, for now

Microsoft really isn't trying to buy Yahoo anymore, at least not right now, Chairman Bill Gates and CEO Steve Ballmer said late last night in a rare joint appearance at Dow Jones' All Things D conference in Carlsbad.

The pair, who generally are kept from being in the same place outside of Redmond, Wash., for security reasons, stuck to the script Microsoft has been using for a while. That is, they are exploring a smaller partnership with the Internet power, they aren't bidding for the whole caboodle and they reserve the right to bid for said caboodle in the future (here's video from the conference).

But the men gave off an air of finality to the situation. That surprised some in the audience who had seen the standoff as a tactical ploy, especially now that the Yahoo board has come under intense pressure from Carl Icahn and other activist shareholders to get back to the table.

"I'm not frustrated at all," Ballmer said. "We couldn't agree on price, basically."

"I still think it's a scale business," he said. "We must think there is something of mutual benefit," or Microsoft wouldn't be trying to cut a new deal.

Under steady needling by interviewers Walt Mossberg and Kara Swisher, Ballmer and Gates, in their own pro-Microsoft way, also conceded that the latest version of Windows, Vista, wasn't all that they'd hoped.

"We have a culture that's very much about `We need to do better,'" said Gates, who has one more month to go as a full-time Microsoft employee. "Vista has given us more opportunity."

That line brought a chorus of laughter from many in the audience. Dell founder Michael Dell, whose computers rely on Microsoft's operating systems, was seated near the front. He didn't come close to smiling.

-- Joseph Menn

Photo: From left, Kara Swisher interviews Bill Gates and Steve Ballmer at the All Things D conference in Carlsbad. Credit: Loic Le Meur via Flickr

EDS takeover will test Mark Hurd’s cost-cutting mettle

With his biggest acquisition to date, Hewlett-Packard Chief Executive Mark Hurd may prove how ruthless he can be.

Since he took the helm three years ago, Hurd has driven the Palo Alto company back to the top of the computing industry by cutting costs. He’s done it relentlessly and without sentimentality, repeating the efficiency mantra every quarter — even as the company’s fortunes improved. That approach will get its biggest test yet as HP tries to absorb the 140,000 employees of Electronic Data Systems Corp., the Plano, Texas-based technology outsourcing company that HP said Tuesday it would acquire for $13.2 billion in cash.

“This is an order of magnitude bigger than what he has done before,” said Fariborz Ghadar, director of Pennsylvania State University’s Center for Global Business Studies.

Hurd, 51, indicated today that job cuts loomed as HP tried to improve its position in the market for data-center management, consulting and other high-tech services.

“We think we know a lot about how to look at overhead and how to look at costs that result from overhead,” he said during a conference call with analysts. “So think of us doing a lot of work that we know how to do and have done at HP.”

Some investors worried that this time Hurd had bitten off more than even he could chew. They have knocked more than 10% off HP’s stock since reports Monday that the two companies were close to a deal. HP shares tumbled $2.56, or 5.5%, to $44.27 Tuesday.

Read more here about the challenge Hurd faces with this deal.

-- Michelle Quinn

Electronic Data Systems: At your service, HP

Hewlett-Packard's $12.8-billion deal to acquire Electronic Data Systems is all about slow and steady revenue.

Corporate belt-tightening + slumping consumer confidence = a rough time to sell PCs and printers.

But IT services, ah, now there's a smooth business. The idea is to sign huge companies to multiyear contracts setting up their data centers, software systems and other high-tech stuff, then watch the money flow in like clockwork. That can help offset the ups and downs of selling hardware. Here's more from our story:

Analysts said the bid for Electronic Data showed that HP was trying to protect its balance sheet from the softening economy.

The company is the worldwide leader in personal computer and printer sales and a strong competitor in computer servers, but sales of those products ebb and flow.

In contrast, the services business -- which includes consulting as well as setting up and running corporate data centers, software and other technology -- often grows during downturns as companies outsource tasks to reduce costs. Plus, corporations often sign multiyear contracts that pay out in predictable ways.

The services business also holds greater potential for growth than many of HP's computer and printer businesses, said Tom Smith, a computer hardware analyst at Standard & Poor's Equity Research.

"There are more ways to add and invent new consulting services if you can establish long-term contracts," he said. "And if you have good services, it supports the next round of hardware sales, and so on. It creates a steadier business."

David Garrity, director of research at Dinosaur Securities, said offering strong services had made hardware companies such as HP "a trusted advisor to a business."

-- Chris Gaither

Photo by LM Otero / Associated Press