Founder Bill Gates will be stepping away from the bulk of his duties at Microsoft in two years time. Starting in July 2008, Gates, aged 50, will devote the majority of his time to the management of the Bill and Melinda Gates Foundation, the world’s largest charitable organization.

Gates made the announcement yesterday afternoon at a news conference held after the markets had closed for the day. Gates will remained involved as Chairman of the corporation and will retain his vast stock holdings. “I always see myself as being the largest shareholder in Microsoft,” Gates told reporters. He holds about 9.5% of all Microsoft stocks, estimated to be worth $21.6 Billion.

While his departure is officially set for mid-2008, many of his day to day duties will start to shift immediately, beginning with his role as Microsoft’s chief software architect, which has been passed to Ray Ozzie.

In moving to take over management of the Foundation, Gates says he was motivated to spend more time tackling the health, education and poverty issues the Bill and Melinda Gates Foundation is dedicated to solving. Last year, Gates vowed to use the majority of his estimated $50 Billion fortune to further the work of the Foundation.

Gates’ announced departure comes at a difficult and crucial time for Microsoft. Though it is the largest and most powerful software corporation in the world, it has fallen far behind rivals Google and Yahoo in the highly lucrative web advertising medium, and has been roundly criticized for failing to meet several deadlines surrounding the release of its pending Vista operating system.

During his 30-year career, Gates is credited with both starting and dominating the growth of the computing era. Microsoft, a company he built with Harvard classmate Paul Allen got its first big break in the early 1980s when IBC selected as the supplier of the first desktop operating system (DOS) for IBM PCs in 1981. For the next twenty years, Microsoft became a virtual monopoly by bundling several pieces of business and finance software into the ubiquitous Office product.

Though Microsoft is one of the largest IT firms in the world, attention tends to fall towards the geeky but affable Gates. “The world has had a tendency to focus a disproportionate amount of attention on me,” he said in a televised interview. “In reality, Microsoft has had an unbelievable breadth and depth of technical talent.”

While he might be stepping back from his daily involvement in the management of the firm, Gates still plans to be the face and voice of Microsoft by making appearances, visiting dignitaries and clients, and giving speeches.

Along with the naming of Ray Ozzie to chief software architect, Craig Mundie, currently one of three chief technical officers will be given the title of chief research and strategy officer. Steve Ballmer is expected to assume many of Gates’ other duties.

Gates’ departure might mark the end of one era in computing but it also holds the promise of initiating a new one. Ray Ozzie is among the most respected technologists in the computer world. With Ozzie’s brains, Ballmer’s passion and the widely recognized organizational brilliance of Mundie, Microsoft’s management shake-up might herald or prompt the breakthroughs needed to fully challenge rivals such as Google, Yahoo, Cisco and IBM.