• The Wall Street Journal, Thursday, June 5, 2008 11:30 AM

On June 27, Microsoft Co-founder and Chairman Bill Gates will step away from daily management of the company to focus on his philanthropy project, The Bill and Melinda Gates Foundation. Steve Ballmer, Gates' longtime friend and colleague, will remain company CEO, but will assume greater control. The Wall Street Journal tells the story of the gradual handoff, which was set into motion in early 2000, when Gates handed his CEO title to Ballmer.

At the time, Ballmer got the title, but Gates, who held sway that went beyond a title, retained the power, and a yearlong power struggle ensued. Gates admits that he would sarcastically undermined Ballmer during meetings. The feud grew so bitter that executives eventually told the pair their struggles were a threat to the company.

However, roughly a year later, Gates had an epiphany: "I had to change," he said, recognizing that he needed to accept his new role as Ballmer's No.2. After that, Gates said he gradually started deferring to Ballmer on more important decisions. Fast-forward seven years, and Gates has allowed his influence to move further and further to the sidelines. For example, Gates left the Yahoo merger, which collapsed on May 3 only for partnership talks to resume a few weeks ago, largely in the hands of Ballmer. Some Microsoft insiders claim that Gates wasn't a major proponent of the deal. That may be, but Gates stands by Ballmer anyhow. "I don't have a different point of view on the Yahoo thing than Steve does," he said. He might not have said the same thing several years ago.

Read the whole story at The Wall Street Journal »