I have copied and pasted the entire article below:
June 16, 2006, 11:24PM Gates confident success won't falter Founder insists Microsoft to avoid others' mistakes
By JOHN MARKOFF New York Times
REDMOND, WASH. - Microsoft stands astride the computing world much as another corporate giant, IBM, once did. Now its task is to avoid repeating IBM's mistakes.
As the PC era wanes and the Internet era gathers force, Microsoft's revenues have never been higher and its quarterly profits remain in the billions. But it has yet to find profitability in an array of businesses that it has entered beyond those it has dominated, operating systems and office applications.
Finding the company's way in the new era will largely fall to the successors of Bill Gates, who announced Thursday that he would leave his day-to-day role at Microsoft in two years. But in an interview Friday, Gates said he was confident the company was positioning itself for success in its fourth decade and beyond.
"I don't think there's any period that's not a transitional period in computing," he said.
Referring to the relentless increase in computing power, he added, "When you have Moore's Law creating these exponentially new capabilities, we're always in a time of utter change, maybe even accelerating change."
And he insisted Microsoft was focused on adapting to change — and learning from companies that failed to do so.
"We're all students of why didn't Wang make the change," he said. "Why didn't Digital Equipment, which was my favorite company, make the change?"
A more fitting lesson may come from IBM, which dominated the mainframe computing era just as Microsoft has ruled the PC age. IBM remained highly profitable in the 1980s even after the advent of the PC produced a growing array of challengers. But by the early 1990s, the eclipse of the mainframe and IBM's inability to find its way in the PC era forced the company to go through a sweeping makeover. And it has never regained previous influence.
Now it is the age of high-speed Internet connections and an array of new digital devices that threaten the formula that established Microsoft's primacy. But Gates argued that the rapidly increasing availability of computing power, which foiled his competitors, will ultimately save Microsoft. As the cost of computing falls, giving rise to new uses and appliances, Microsoft will find new markets and grow where other companies have failed, he said.
In that sense, technical advances have a different impact on computing than on other businesses, increasing rather than decreasing demand.
"When they invented radial tires, they should have shot the guy," he said. "The whole industry went through a crisis, because it took nine years to squeeze out the extra factory capacity, because the tires lasted longer."
Microsoft's future, he said, lies in an array of new applications. He cited as an example an announcement planned next month on extending the Microsoft Office business into the telecommunications world by more tightly linking the power of PCs and telephones.