Gates, 50, said Thursday he will remain the company's chairman after transferring his daily responsibilities over a two-year period. One of the key people taking on Gates' responsibilities is technology luminary Ray Ozzie, who developed Lotus Notes and came to Microsoft when it acquired his company, Groove Networks Inc., in 2005.

The move will end an era at Microsoft, which Gates founded in 1975 with childhood pal Paul Allen and has been the public face of ever since.

The Redmond company on Thursday laid out a plan for other high-ranking executives to take on Gates' duties. Gates and Chief Executive Steve Ballmer also noted that recent corporate reorganizations have been designed to move more responsibility to lower-ranking executives, so the company could more quickly make decisions without Gates and Ballmer.

But, in an interview with The Associated Press, Ballmer conceded that there was no way to replace Gates.

"If we think anybody gets to be Bill Gates, I don't think that's a realistic hypothesis," he said.

Gates stressed that, although he was giving up day-to-day responsibilities beginning in July 2008, he would still play a role at the company.

"I'm not leaving Microsoft," he said.

Gates also said he had no plans to give up the distinction of being the company's largest shareholder.

"I'm proud of that," he said.

Ozzie will immediately assume Gates' title as chief software architect and begin working with Gates on overseeing all software technical design.

Chief Technical Officer Craig Mundie will immediately take the new title of chief research and strategy officer and will work with Gates in those areas. Mundie also will work with general counsel Brad Smith to guide Microsoft's intellectual property and technology policy efforts.

Gates' decision comes at a difficult time for Microsoft. The company recently said it was delaying the new version of its Windows operating system yet again, and it is struggling to compete with Internet giants such as Google Inc. and Yahoo Inc. Investors also were caught off guard this spring when Microsoft announced plans to substantially increase overall research and development costs, and sent share prices tumbling.

But Gates said Microsoft is always facing new competitors and challenges and the recent spate didn't affect his decision.

"There isn't any time in our history when there haven't been questions about Microsoft," he said.

Gates is ranked by Forbes magazine as the world's richest man, with an estimated wealth of about $50 billion. That great wealth, he said, also brings great responsibility, and he repeated his often-spoken desire to give away the bulk of his fortune to charity.

Gates said he didn't realize when he started the Bill & Melinda Gates Foundation in 2000 what potential there was for addressing some of the world's greatest problems, such as global health and education. The foundation is now the world's largest philanthropy, with assets totaling $29.1 billion.

"Just as Microsoft has taken off in ways I never expected, so has the work of the foundation," he said.

The foundation is considered a leader in international public health, particularly in the fight against HIV, malaria and tuberculosis in the developing world. In the United States, it has put its massive resources behind reforming education and accessing technology in public libraries.

Gates dropped out of Harvard to start Microsoft with Allen in 1975. He took Microsoft public in 1986 and was the company's chairman and CEO until 2000, when he assumed the role of chief software architect and Ballmer, a college friend and one of Gates' early hires, took over the role of chief executive officer. Ballmer will remain responsible for all day-to-day operations and the company's business strategy.

The world "has had a tendency to focus a disproportionate amount of attention on me," Gates said, when in reality, Microsoft is a company with an extraordinary depth and breadth of talent.

"Our leadership team has never been stronger," he said.

"Bill and I are confident we've got a great team that can step up to fill his shoes and drive Microsoft innovation forward without missing a beat," Ballmer said.

Ballmer said he had no plans to step down soon.

"I'm in it for the long run," Ballmer said.

For the past six years Gates has focused on Microsoft's software development as the company's chairman and chief software architect.

Ozzie, 50, worked on the first electronic spreadsheet, VisiCalc, in the early 1980s. In 1983, he joined Lotus Development Corp. - Microsoft's archrival at the time - to develop Lotus Symphony, a business software suite.

He later founded Groove Networks, where he developed Groove Virtual Office. Microsoft acquired Groove Networks in April 2005 and named Ozzie chief technical officer.

Mundie, 56, joined Microsoft in 1992 to create and run its Consumer Platforms Division, which was responsible for non-personal computer software. Mundie also started Microsoft's digital TV efforts. His current responsibilities include global technology policy and a variety of technical and business incubation efforts.

Ozzie and Mundie will continue to report to Gates, as will the company's third chief technical officer, David Vaskevitch. At an unspecified time during the two-year transition period, they will shift to reporting to Ballmer.

The news was announced after financial markets closed. Earlier, shares in Microsoft rose 19 cents, or 0.87 percent, to close Thursday at $22.07 on the Nasdaq Stock Market. Shares lost 9 cents in after-hours trading.