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May 24, 2011 1:22 PM

Exclusive: Microsoft loses last Xbox founder, mobile PC visionary

Posted by Brier Dudley

It's the end of an era at Microsoft today.

Otto Berkes, the last of the original Xbox founders still at the company, submitted his resignation this afternoon.

Berkes went on to lead development of a new category of ultraportable, wireless touchscreen computers that Microsoft called Ultra Mobile PCs.

Among the prototypes Berkes built was a slate-like touchscreen computing device that Bill Gates showed at a 2005 conference in Seattle, years before there were even whispers about Apple's iPad. But the first generation of UltraMobile PCs were expensive, the hardware wasn't as advanced and Microsoft lost interest before the category blossomed.

otto berkes UMPC.jpg
"It's unfortunate you can't repeat that experiment," Berkes said, but he tried to cast it in positive light. "One of the outcomes of that effort was a change in thinking around Windows and the PC and touch interfaces and hardware evolution."

In a comeback effort, Berkes worked on the hardware and operating system of a prototype slate computing device code-named Courier that Microsoft brass scuttled in early 2010.

Berkes later was general manager for Microsoft's Chief Software Architect Ray Ozzie until Ozzie left last year. Most recently he's been working on Bing's datacenter hardware architecture.

Berkes is leaving for another company outside of the Seattle area but he wouldn't say which one. He did say the departure isn't because of frustration over projects or strategic choices by Microsoft and is instead about him trying something different after 18 years in Redmond.

"It's a good time for me to make a transition to a different set of challenges and something new and fresh," he said.

Still, his departure comes as Microsoft is struggling to catch up to consumer-market competitors that have been more willing to take and stick with big bets on emerging new categories.

The big question is whether Microsoft's current leadership can nurture and retain the rare kind of employee who can conceive of far-out new products, defend the ideas to fruition and ship the finished product.

Berkes had the most success when Bill Gates led the company, perhaps because they were similarly enthusiastic about the potential of new and transformative gadgets built on the next generations of computer hardware and software.

"Otto definitely did have tighter affinities with Bill," recalled Ted Hase, another one of the four original Xbox founders, who left the company in 2006 and now develops slot machines for a company in Las Vegas.

"There was an aspect of Bill where Bill stayed somewhat of a dreamer. In those dreams come those flashes and those sparks of creativity. And I think the company has lost that which is a sad day."

Hase said Berkes has "the combination of being able to actually see the bigger picture but also he is someone who has the courage and the strength to withstand all of the criticism and ridicule on behalf of that vision."

History will prove out the concepts Berkes fought for behind the scenes at Microsoft, Hase said.

"I think if anything, the successes of the other companies, the success of the competitors, the Apples, the Googles of the world, is somewhat of an affirmation that all of the early criticism Otto had taken was unfounded," he said. "In the end, Otto basically held truth in his hand."

Things turned out differently with the Xbox. But that began when Microsoft was at its apex and ferociously defending its position against challenges from companies such as Sun and Netscape.

Berkes and Hase were among a group of four who first pushed Microsoft to develop a Windows-based gaming system to compete with Sony's PlayStation 2, which was luring game companies from the Windows platform in the late 1990s. The other two were Seamus Blackley, who left in 2002, and Kevin Bachus, who left in 2001.

The soft-spoken Hungarian programmer led Windows graphics teams as the operating system rapidly evolved from Windows NT thorugh XP. He joined Microsoft in 1993 after developing a rendering system for Autodesk's AutoCAD for Windows.

In 1998, Berkes and his team ordered a few Dell laptops, took them apart and built the first prototypes of a Windows gaming console.

Ed Fries was leading Microsoft's games publishing business when the four Xbox founders pitched a "Direct X Box" based on the Windows DirectX graphics technology that was developed by Berkes' team.

"He was one of the crazy guys who came in my office one day with this idea of doing this thing, making this Direct X box," Fries recalled. "They talked me into joining up with them and helping to make it happen. It wouldn't have happened without him."

The Xbox business is now approaching $10 billion in yearly sales and last quarter its growth outpaced that of Windows.

Fries left Microsoft seven years ago but continues to work with its games business through ventures such as Airtight Games, a Redmond studio he co-founded.

He said the Xbox "was definitely the gamble and they stepped up and they did it."

But Fries doesn't believe Microsoft has lost that sort of innovative spirit, based on recent meetings he's had with employees.

"The impression I got is they're making some pretty big bets about the future," he said. "I don't think they've given up."

Berkes, 48, rode the waves up and down through it all but he was diplomatic today.

"No regrets, but it's time to move on for me," he said. "I'm very proud of what I was able to accomplish here."

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Gadgets and games | Fun stuff I've written about lately includes Apple's iPhone, Hewlett-Packard's HDX laptop and Microsoft's Halo3. Also on the radar are new digital video boxes such as the Tivo HD and the Vudu.