Bill Gates is retiring, sort of. He is still only 52, and he is going off to spend more time guiding the world’s richest philanthropy, the Bill and Melinda Gates Foundation. He will still be Microsoft’s chairman and largest shareholder, but Friday is his last day as a full-time worker at the software giant, marking the unofficial end of his career as a business leader. And what a career it has been. Mr. Gates has been an animating force behind the personal computer revolution, helping to build a huge global industry and engineer blockbuster products like Windows and Office, used every day in offices and homes around the world. The Harvard dropout was the wealthiest person on the planet for years — worth more than $100 billion in 1999 — though his fortune is now about half that because of the decline of Microsoft’s shares and his continued donations to his foundation, which is focused on global health and education. Despite his success, Mr. Gates is moving on as the company he co-founded in 1975 is struggling to find its way. The center of gravity in technology has shifted from PCs to the Internet, altering the old rules of competition that were so lucratively mastered by Microsoft. For millions of users, mobile devices like cellphones are beginning to edge out PCs as the tool of choice for many computing tasks. And Google, the front-runner in the current wave of Internet computing, has wrested the mantle of high-tech leadership from Microsoft. Although Mr. Gates will spend one day a week at the company, it will be up to his successors, led by Steven A. Ballmer, the chief executive, to master the challenges of the Internet or watch Microsoft’s wealth and stature in the industry steadily erode. “Bill’s legacy is Windows and Office, and that will be a rich franchise for years to come, but it’s not the future,” said David B. Yoffie, a professor at the Harvard Business School. Still, the Gates legacy is impressive. In addition to the software itself, Mr. Gates and his company have fundamentally shaped how people think about competition in many industries where technology plays a central role. Today, there are more than one billion copies of the Windows operating system on PCs around the world. Industry experts and economists say that Windows is not necessarily the best or most admired software for running the basic operations of a personal computer — Apple’s Macintosh can claim the most devout fan club. But Mr. Gates grasped and deployed two related concepts on a scale no one ever had in the past: the power of network effects and the value of establishing a technology platform. Put simply, the network effect describes a phenomenon in which the value of a product goes up as more people use it. E-mail messaging and telephones are classic examples. A technology platform is a set of tools or services that others can use to build their own products or services. The more people who use the tools, the more popular the platform can become. Mr. Gates took advantage of both notions and combined them to build Microsoft’s dominance in PCs, spreading its influence with computer makers and software developers. Today, there are many thousands of software applications that run on the Windows platform, not just word processing and spreadsheets but also the specialized programs in doctors’ offices, factory floors and retail stores — a very broad network on a nearly ubiquitous technology platform. “Gates saw software as a separate market from hardware before anyone else, but his great insight was recognizing the power of the network effects surrounding the software,” said Michael A. Cusumano, a professor at the Massachusetts Institute of Technology’s Sloan School of Management. That, Professor Cusumano added, was the essential difference in the paths of Microsoft and Apple, the early leader in personal computing. Apple, he said, focused on making outstanding products alone, while Microsoft nurtured a growing ecosystem of outside software developers who use, and are dependent on, Microsoft’s technology. The result, he added, is that, while Apple continues to make outstanding products, more than 90 percent of personal computers run Microsoft software. In the early years, it was unclear how much Mr. Gates was pursuing each opportunity as it came, as opposed to carrying out a grand strategy. He certainly had large ambitions. When he was a Harvard undergraduate, Mr. Gates lamented that so many of his fellow students pursued a “narrow track for success” instead of being willing to “take big risks to do big things,” recalled Michael Katz, a Harvard contemporary who is now a professor at New York University. In a Harvard Business School case study, published in 1994, Mr. Gates spoke of Microsoft’s strategy in terms of network effects and technology standards that, combined, enabled the company to command markets. “We look for businesses where we can garner large market shares, not just 30 or 35 percent,” he said. In the past, Microsoft has beaten back challenges and vanquished rivals, even when it came late to markets, as it did in the first wave of Internet technology. Mr. Gates’s shrewd 1995 decision to embrace Internet browsing technology and attack the early leader, Netscape Communications, started a pitched antitrust battle with the government. “But he extended Microsoft’s hegemony for a decade,” said Mitchell Kapor, a longtime rival. However, Microsoft is lagging badly in current round of Internet competition and, analysts say, is facing more formidable challengers this time — notably Google. Microsoft’s share of Internet search in the United States is less than 10 percent, while Google holds more than 60 percent and Yahoo has about 20 percent. And search is only part of the new platform on the Web, which includes social networks like Facebook and MySpace and Internet-based alternatives to traditional desktop software, including e-mail messaging, word processors and spreadsheets. Traditional desktop software — and the technology standards Microsoft controls there — matter far less when more software is accessed with a Web browser and delivered over the Internet from vast data centers run by Google and others. The new approach is known as “cloud computing,” and the business model behind it is typically to sell online advertising and software services. At Microsoft, there is scant sign of panic, despite its trailing position and its failed bid to buy Yahoo for $47.5 billion as a catch-up strategy. Microsoft sees an evolution in computing, not a disruptive revolution that will imperil the company, said Craig Mundie, Microsoft’s chief research and strategy officer. Mr. Mundie said Microsoft is preparing for a widening world of both cloud computing and “client” machines, not only personal computers but also cellphones, cars, game consoles and televisions, all running Microsoft software. “The next big platform is the union of the clients and the cloud,” he said. Tags:INTERNATIONAL NEWS Internet MONEY ONLINE SUCCESS US WEALTH WORLD AFFAIRS

Kathryn Carlson reported from Kennedy Airport in New York and Nick Bunkley from Detroit.

ANNAPOLIS, Md. — The United States opened two days of intense economic talks with China on Tuesday with the Treasury secretary Henry M. Paulson Jr. declaring that despite recent tensions over trade, investment and food and product safety, ties between the two countries were “growing in a positive direction.” “The United States and China don’t always agree on economic issues,” Mr. Paulson said in prepared remarks Tuesday at the United States Naval Academy on the Severn River here. “Sometimes we may even disagree quite strongly. But we keep talking.” Seeking to smooth the way for the discussions, Mr. Paulson said that while China faced many economic difficulties, so did the United States. One reason that China does not import more American goods, he said, was that its savings rate was so high. In the United States, he said the savings rate was too low. The last round of talks in December in Beijing set up a 10-year goal of cooperating on energy and the environment, and Mr. Paulson said he hoped that the two countries could take additional steps in that area. “As the two largest net importers of oil, China and the United States face similar challenges as demand for energy increases, and the global production capacity has remained relatively flat for the past 10 years,” he said. In the last several months, Mr. Paulson said there has been progress on issues like monitoring the safety of food and other products imported from China. Now, he said, China needed to do more to crack down on piracy and counterfeiting of American goods, including software and movies, and opening its markets to American investments and goods. The trade deficit between the United States and China topped $250 billion last year, causing some anxiety in Congress. Mr. Paulson’s comments came the morning after Chinese and American businesses, seeking to overcome mutual suspicion of foreign investment, announced $14 billion in new deals. The deals involve $8 billion in Chinese investments and purchases of aircraft engines, telecommunications equipment, semiconductors and electronic components, said Chen Deming, minister of commerce in China. Another $6 billion involved American purchases and investments in China. Among the American companies signing deals were Chrysler, Cisco Systems, Ford Motor, General Motors, I.B.M., Motorola, Sun Microsystems, Qualcomm and Texas Instruments. In an interview on Monday, Mr. Paulson said the meetings were not meant to resolve specific disputes but to discuss how to overcome economic downturns and deal with impending crises in energy and the environment. “The tone will be one of constructive engagement,” Mr. Paulson said. “We’re going to be dealing with some of the most fundamental economic issues there are. I know some people would like to see quick fixes. But the most important issues don’t avail themselves to quick fixes.” The Chinese delegation is scheduled to meet with President Bush at the White House on Wednesday afternoon. The Annapolis talks are the fourth in a twice-a-year series that Mr. Paulson started when he left Goldman Sachs to become Treasury chief in 2006. The biggest issue at the time was American irritation over China’s intervention in currency markets to purchase dollars and keep the value of the dollar high in relation to China’s currency. Since mid-2005, China has allowed its currency, the yuan, to appreciate nearly 20 percent, easing at least some of the criticism in Congress. The Bush administration continues to accuse China of raising barriers to foreign investment, and China has increasingly complained that its attempts to invest in America often provoke an outcry. Mr. Paulson said that, although China had made only limited reforms in its economy and taken limited steps to open its market to American goods and investment, the “strategic economic dialogue,” known as the S.E.D., produced more progress than otherwise would have been the case. “I would argue that the reason we’ve made progress is that the S.E.D. is a mechanism for convincing China that certain things are in their interest,” he said, citing American efforts to get China to open its economy to foreign investment and to lift government subsidies of export industries. In recent months, the Chinese government has pushed back with demands that the United States do more to open its economy to Chinese investments and to halt the depreciation of the dollar against European and other currencies, a trend many economists say has helped drive up oil and food prices. The Chinese delegation will be led by Wang Qishan, a vice premier and former mayor of Beijing, and a graduate of Northwestern University, who took office as the country’s chief economic negotiator earlier this year. He succeeded Wu Yi, one of the highest-ranking women in China and often described as a tough negotiator. Mr. Paulson said that though China had lately stepped up its criticism of the United States, “I sure didn’t find Wu Yi to be a shrinking violet.”