Raikes to Follow Gates Out the Door

Microsoft Business Division President Jeffrey Raikes has announced he'll be stepping down in September

Bill Gates won't be the only Microsoft (MSFT) veteran leaving the software giant later this year. Jeffrey Raikes, who joined the company in 1981 roughly as its 100th employee and rose to become president of Microsoft's business division, said on Jan. 10 that he'll retire in September.

The departure is another sign of a changing of the guard at Microsoft, with Gates stepping down June 30 to work full time for his philanthropic foundation. Raikes says he has no specific plans after his retirement, though he's considering a second career in teaching or public service. "I have a lot of passions beyond the industry," Raikes says. "I may explore those."

Successor Named

Raikes will be replaced by Stephen Elop, who stepped down as chief operating officer at Juniper Networks (JNPR). Elop previously held jobs at two Microsoft rivals, Adobe Systems (ADBE), where he was president for worldwide field operations, and Macromedia, where he was president and CEO when it was acquired by Adobe (BusinessWeek.com, 6/19/06). The experience should serve him well in his new role, where he'll run Microsoft's Information Worker, Business Solutions, and Unified Communications businesses when he starts at the end of January. The only part of Raikes' job he won't get is the Server & Tools business, run by Microsoft Senior Vice-President Bob Muglia, who will report directly to CEO Steven Ballmer.

Though he's little known outside of techdom, Raikes, 49, has had more impact on Microsoft than just about any other employee, save Gates and Ballmer. "He's really one of the pioneers of the business," says Pete Higgins, a former group vice-president at Microsoft, who was hired by Raikes and now works as a venture capitalist in Seattle.

Creation—and Revival—of Office

Raikes led the group that wove together Microsoft's word-processing and spreadsheet programs to create Office, one of the twin monopolies that the company has used to dominate the PC industry. The product generated more than $100 billion in sales and has more than 500 million users worldwide. "I'm incredibly proud of that," Raikes says. "I really do feel as though I was part of changing the world."

In the early 1990s, Gates asked Raikes to switch his focus to Microsoft's sales. In 1996, Raikes took over Microsoft's global sales operations. Revenue tripled in the six years he was at the helm.

He returned to Office in 2002, when it was sputtering at 1% growth, turning the old franchise into a business that registered 13% growth in fiscal 2007. Raikes revived sales by shelving the old paradigm of merely adding new features to Office, instead redefining the business to include new markets such as business intelligence, which helps companies analyze data, and unified communications software, which helps link together a company's various communications systems.

Ballmer, in an e-mail to employees about Raikes' departure, wrote, "Very few people have contributed more to Microsoft than Jeff."

Raikes leaves behind a business that, while growing at a good pace, faces a host of new competitors. Longtime Microsoft partner SAP (SAP) competes in the market for small and midsize business software . The company is duking it out with Cisco Systems (CSCO) in unified communications software and services. And it's even crossing paths on the Web with Google (GOOG), which is trying to lure users to its online word-processing and spreadsheet applications.

A Tough Competitor

In addition to contributing to Microsoft's business growth, Raikes etched his name in the company cultural history as well. During the federal antitrust hearings a decade ago, U.S. District Judge Thomas Penfield Jackson cited a memo from Raikes—in which he wrote that "Netscape pollution must be eradicated"—as an example of the company's hypercompetitiveness. Turns out that Raikes was writing lyrics to a rap-parody video, shot for the company's sales force, in which Coolio's Gangsta's Paradise becomes Windows Paradise, with Raikes decked out in Guardian Angel garb.

Of course, Raikes is as competitive as anyone at Microsoft—part of the reason for his success. Back in the early 1990s, when Raikes ran the applications group, Gates once suggested that executives should wake up thinking about their main competitors. So Raikes decided to learn the names and birthdays of the children of Pete Peterson, then head of top rival WordPerfect, something Peterson has since laughed off. But to this day, Raikes still knows all six kids' names.

Raikes long ago made his fortune at Microsoft, and has personally invested in other businesses. Raikes holds 15.4 million shares of Microsoft stock, according to a recent regulatory filing, worth more than $525 million. He's also a part-owner of the Seattle Mariners and the Kelowna (B.C.) Rockets, a minor-league hockey team. He owns a luxury resort on Hood Canal in Washington.

A Nebraskan who proudly flies a University of Nebraska Cornhusker flag from his home during football season, Raikes still owns a piece of his family's nearly 4,000-acre farm in and near rural Ashland, Neb. He just completed a home there where his family will stay during visits, though he intends to remain in Seattle. As work-related travel becomes a thing of the past, that's something he'll get to do a lot more often come September.