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Microsoft executive envisions future

Before exiting, Ozzie warns PCs won’t always be dominant

“It’s important that all of us do precisely what our competitors and customers will ultimately do: close our eyes and form a realistic picture of what a post-PC world might actually look like . . . ” — Ray Ozzie, in a blog post directed at Microsoft colleagues. “It’s important that all of us do precisely what our competitors and customers will ultimately do: close our eyes and form a realistic picture of what a post-PC world might actually look like . . . ” — Ray Ozzie, in a blog post directed at Microsoft colleagues.
By Hiawatha Bray
Globe Staff / October 27, 2010

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Even as he’s on his way out the door at Microsoft Corp., Ray Ozzie, the company’s chief software architect, is trying to set the giant company on a path toward a world that’s no longer dominated by the personal computer.

In a memo posted on his Internet blog on Monday, Ozzie urged his Microsoft colleagues to “close our eyes and form a realistic picture of what a post-PC world might actually look like, if it were to ever truly occur.’’

A pioneer in developing network-based software, Ozzie predicted a future dominated by cloud computing, in which people run software on remote, Internet-linked computers, rather than on their own machines. His memo urged Microsoft colleagues to push the company to develop products and services for that future.

Ozzie made a name for himself at Lotus Development Corp. in Cambridge, where he was lead developer of the company’s flagship Notes software. In 2005, a company he had founded called Groove Networks Inc. was acquired by Microsoft, and Ozzie became its chief software architect, a title previously held by cofounder Bill Gates. Last week, Microsoft chief executive Steve Ballmer announced Ozzie’s resignation from the post. Ozzie himself has declined to speak about his departure. Microsoft did not immediately return a call seeking comment.

The memo from Ozzie laid out his vision for what Microsoft should become. But that dream might be a nightmare for the company, which derives most of its revenues and profits from its Windows operating systems and Office productivity software for desktop computers.

“They’re a victim of their own success,’’ said Brendan Barnicle, a software industry analyst at Pacific Crest Securities in Portland, Ore. Barnicle agreed with Ozzie’s argument that Microsoft must prepare for a future dominated by smartphones, tablet computers, and cloud-based services rather than traditional desktop machines. But he noted that these businesses won’t deliver nearly the lavish margins provided by Windows and Office.

“What they haven’t been able to do is find anything they can get into that’s nearly as profitable,’’ said Barnicle. Barnicle cut his rating on Microsoft stock from “outperform’’ to “sector perform’’ on Monday; another analyst, David Hilal of FBR Capital Markets also dropped his rating.

Wes Miller, an analyst at independent research firm Directions on Microsoft, said that Ozzie is warning Microsoft to “prepare to make yourself viable in a world where the PC may not be the main way people get things done.’’

Miller, a manager at Microsoft from 1997 to 2004, said the company has dragged its feet on developing non-PC products. He pointed to Microsoft’s new software for smartphones, which has won critical praise, but debuted long after similar products from Apple Inc. and Google Inc. “To come out three years late with a phone that has some of the functionality of the iPhone 4 . . . it’s a mixed message,’’ Miller said.

Ozzie’s resignation is the latest of many high-level departures at Microsoft. Stephen Elop, former head of the company’s Office software operation, resigned in September to become president of Finnish cellphone maker Nokia Corp.; two top gaming and entertainment executives, J Allard and Robbie Bach, departed in May; Bill Veghte, who oversaw marketing of Windows, took charge of Hewlett-Packard Co.’s software business in May; and chief financial officer Christopher Liddell quit in December to take a similar post at General Motors Corp.

“We’ve probably seen more high-level departures at Microsoft over this year than we’ve seen at any high tech company over the past 10 years,’’ Barnicle said, adding that the spate of resignations appear to be a vote of no-confidence in Microsoft chief executive Steve Ballmer. “You would certainly say that people are calling into question his leadership,’’ said Barnicle, “and that’s why you’re seeing these departures.’’

Hiawatha Bray can be reached at bray@globe.com.