Bill Gates is stepping down from his full-time role as Microsoft’s Chief Software Architect in July 2008, when he will hand over the baton to right-hand man and current CTO Ray Ozzie. Gates will thereafter concentrate on his eponymous charitable foundation. Woah…

Gates said he believes “the road for Microsoft is as bright as ever” and emailed staff to thank them for their efforts, making reference to the fact that they have helped create the success and wealth that has ultimately funded the Bill and Melinda Gates Foundation, which will allow him to pursue a new philanthropic role. The foundation has built up a war chest of around $29bn.

Steve Ballmer has acted as Microsoft CEO for the past half-decade, doubling revenues to around $45bn a year during that period, but Gates remained Microsoft’s head honcho in the eyes of the press. He says journalists have “overestimated” the amount of control he wields at Microsoft.

His record is clearly formidable, though some say Microsoft have faltered in recent years, with arch-nemesis Google winning all the plaudits, and the search engine war.

Threats to Microsoft have been largely linked to the emergence of the internet, and a general shift away from the desktop, as well as open source, which continues to gather steam. Even the once-dominant Internet Explorer has in recent years lost market share to the likes of Firefox, an open source browser supported by Google.

Google has search in the bag, while Apple has dominated the digital music landscape (albeit using proprietary technology, Microsoft-style). Yahoo is becoming increasingly strong. The likes of Murdoch and Diller continue to prowl. But a company capitalised at more than $225bn is always going to have the financial clout to re-engineer its fortunes, and with Gates moving on we may see new web strategies emerge, not to mention the launch of Vista, due out next year (alongside Office 12).

The internet era hasn’t been entirely unkind to Microsoft. Like Google, it diversified away from its core product set, moving into new areas including consoles. Some say Microsoft’s Xbox strategy has been flawed and costly, but it has done a much better job of joining up online gaming than Sony.

More work is needed on its search engine and associated advertising network, but like Yahoo, MSN has a large active / registered user base, while Google by comparison has a hell of a lot of searchers but not the deeper relationships with the vast majority of its users.

Gates stressed that he “isn’t leaving Microsoft” and will act as chairman for an “indefinite” period.

More on Gates’ departure at the BBC

Dell, HP, Google and Yahoo have so far failed to comment on the news