Bill Gates's decision to step down immediately as chief software architect and to relinquish all managerial roles in July 2008, comes at a time when Microsoft, whose Windows operating system runs an estimated 90% of the world's personal computers, is struggling to find new sources of growth.

Gates passed the technical mantle to Ray Ozzie, creator of the Lotus Notes e-mail program. Ozzie, who joined Microsoft last year, is at the heart of Microsoft's push to transform software into a service and maintain its market dominance.

By July 2008, Gates will work for the Bill and Melinda Gates Foundation he has funded with his software billions to promote health and education projects around the world. He will remain as Microsoft's chairman and an adviser on key development projects.

"Obviously, this decision was a very hard one for me to make," Gates said at a news conference in Redmond, Washington, on Thursday. "The change we're seeing today is not a retirement, it's a reordering of my priorities."

New growth markets

Few expected the news would affect Microsoft's operations. Gates began taking less of a role with the company when he handed the chief executive reins to long-time deputy Steve Ballmer in January 2000.

Microsoft's stock has stagnated for several years as investors question its ability to find new growth markets.

"We will continue his vision of thinking big and executing even bigger."

Steve Ballmer,
Microsoft's deputy CEO

Microsoft has been trying to respond to threats from companies such as Google Inc, which is using its dominance in internet search to offer a range of other services and products, such as web e-mail and spreadsheets.

Shannon Reid, manager of Evergreen Strategic Growth Fund, which owns Microsoft shares, said: "I bet to a certain degree he [Gates] might be getting tired of beating his head against the wall and trying to find other profitable revenue streams besides their Windows operating systems."

Confidence

At the same news conference as Gates, Ballmer, 50, spoke with his usual confidence and enthusiasm, saying Microsoft aimed to add another billion customers in the next decade.

Ballmer said: "We are really also announcing the transition we're making as a company to reach the next level of success and meet the needs of a world hungry for new technology.

"We will continue his vision of thinking big and executing even bigger."