Ozzie's Famous Internet Services Disruption Memo

By Reuters  |  Print this article Print

Lotus Notes creator Ray Ozzie, who has spent the last five years of his career at Microsoft as the software giant's software chief, plans to step down.

He had made a splash at the company in 2005, shortly after he joined, with his now-famous "Internet Services Disruption" memo, which pushed Microsoft toward the Internet and cloud computing.

Some saw that as a challenge to Microsoft's core business of getting software installed on as many computers as possible, but the company now says it is "all in" for cloud computing, although it is still far from certain that Microsoft will ultimately realize the change of business model or benefit from it.

Ozzie's key project, the "Azure" platform for developing cloud-based applications, debuted this year to moderate success, and is now part of another unit, Microsoft's Server and Tools division.

 The company is now extending beyond Azure, trying to grab a greater share of customers' tech spending by offering to handle their servers, data storage and other computing needs.

Ozzie cut a slightly detached figure at Microsoft, and never fully established himself as a force at the company's campus near Seattle, preferring to spend half his time at his home in Massachusetts.

"I don't think this means much for the future of software development at Microsoft because he didn't leave a stamp," said Fort Pitt Capital Group analyst Kim Caughey Forrest.

Microsoft shares fell 2.2 percent to $25.24 in after-hours trading.

The move signals a new focus on entertainment at the world's largest software company, where it has lost ground to Apple Inc (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) recently.

According to a memo sent by Ballmer on Monday, Ozzie will focus on entertainment efforts at the company and retire after an unspecified time, which people familiar with the matter said would be a matter of months.

Ozzie's move could revitalize entertainment efforts at Microsoft. Its entertainment and devices unit, which includes the Xbox game system and the new Windows 7 phones, has been struggling to win consumers in areas like phones, TV software and tablets, where Apple and Google are charging ahead.

"When you look at consumer market, that is where Microsoft is lagging now," said Gleacher & Co analyst Yun Kim. "That's where they can definitely use some outside help in terms of re-energizing innovations and the whole growth driver around that side of the business." (Additional reporting by Liana Baker in New York and Alexei Oreskovic in San Francisco) (Reporting by Bill Rigby. Editing by Robert MacMillan, Bernard Orr)