Bill Gates' Resignation Could Save Microsoft

Bill Gates' Resignation Could Save Microsoft

Some of Microsoft's largest investors are pushing Bill Gates to step down from his role as chairman of the board, according to Reuters.

Should that occur, Microsoft shareholders should view it as a positive catalyst for the stock. Although Steve Ballmer has been blamed for much of Microsoft's struggles over the last decade, Gates has been behind the now-outgoing CEO.

Microsoft's new strategy, one focused around integrated "devices and services" and championed by both Gates and Ballmer, could run the company into the ground. Bringing in new, visionary leaders could help Microsoft change course before it's too late.

Earlier this summer, Microsoft announced a reorganization of the company, aiming to orient it around devices and services. The move is somewhat radical, but had been coming for quite a while. A decade ago, Microsoft was strictly a software company, but through the introduction of its Surface tablet and its rollout of dedicated retail stores, Microsoft has been transforming itself into something akin to Apple .

And why not? Apple's long-standing commitment to integrated devices helped the company surpass Microsoft in market cap back in 2010. By building both the hardware and software in-house, Apple is able to offer a superior user experience on its mobile devices. That's resulted in unparalleled consumer loyalty. A survey by Yankee Group back in April revealed that 91% of iPhone users intend to stick with Apple.

But there's really no reason to expect an integrated Microsoft platform to successfully compete against Apple. Others (BlackBerry, Palm) have tried and failed. The only company that's found success has been Google , which ironically relied on Microsoft's old model of separating hardware and software to achieve Android's market share dominance.

Moreover, the long-term effects of Apple's closed system may not yet have been fully realized. Through its domination of key markets such as China, Android is continuing to grow. And while many investors might equate Android handsets to Samsung's Galaxy lineup, Chinese companies like Xiaomi and Lenovo have only begun to produce Android devices -- and both companies plan to target Western markets in the coming years.

At the same time, it wasn't until earlier this year that Android surpassed iOS in terms of tablet market share. In the second quarter, Android tablets accounted for 62.6% of the market to iOS' 32.5%, according to IDC. In time, Android tablets may account for about 80% of the market, as they do when it comes to smartphones. Should this market share dominance result in developers flocking to Android, iOS would be challenged.

But will Gates leave?
Ultimately, there's no guarantee that Gates will leave Microsoft. He still owns about 4.5% of the company, making him the single largest shareholder. And yet, as long as he's there, Microsoft is in jeopardy. Rather than embrace openness, something that Google championed with Android, Microsoft is copying Apple, going the integrated route and competing head-to-head.

But as Android's growth has shown, open systems have an advantage -- at least when it comes to market share. Apple, with its unparalleled focus on user experience, may be able to offer a solid, integrated ecosystem, but that's something Microsoft has never been able to do, and there's no reason to expect it now. Sales of Microsoft's first integrated device, the Surface RT tablet, were bad enough to solicit a writedown back in July. The recently announced second version features only minor improvements.

As long as Gates is there, Microsoft is likely to stick to this new strategy, one that appears destined to fail.

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Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Google. It also owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Originally published