Mozilla CEO John Lilly to step down and head to Greylock

According to several sources, John Lilly, the well-regarded CEO of Mozilla, is preparing to give up his post at the open-source software nonprofit foundation, which is also a for-profit start-up.

[Update: Lilly confirmed the move in an e-mail to Mozilla employees, which you can read below in its entirety.]

Lilly (pictured here) is moving to Greylock Partners as a venture partner, sources added, although the affable entrepreneur could eventually end up doing a start-up.

Lilly became CEO of Mozilla in early 2008, after serving as its COO. He took over from Mitchell Baker, who remained the company's chairman.

Sources added that a search was on to find Lilly's replacement, in what will be gradual transition that will last many months. Lilly will stay involved at Mozilla and will continue to serve on its board of directors.

While Mozilla makes a number of products, it is best known for its Firefox browser, whose share has steadily increased since it debuted in late 2004.

According to a recent survey, Firefox had a 24.6 percent share, well up from its 11 percent share in 2006.

Microsoft still holds the lead place in software to navigate the Web with its Internet Explorer, with a share that just dipped below 60 percent. The Chrome browser from Google is in a distant third place.

Mozilla just announced that it will ship a beta of Firefox 4 next month, with a finished version coming out in November. It is slated to have a slicker new interface and speed improvements.

By dislodging Internet Explorer from its dominant market position, Firefox has proven not only that open-source projects often provide better software, but that it's possible for a particularly well done one to become an everyday consumer application.

Despite its success, Mozilla still has to keep up the innovation and technical prowess. But, given its unusual status as both a profit and nonprofit, it is hindered in that it is not likely to go public and shower its Silicon Valley employees with giant gobs of overhyped stock.

Here's Lilly's e-mail to staff:

Everyone,

As my five year anniversary at Mozilla approaches, I've decided that it's time for me to move on to my next role sometime later this year. This won't happen today or tomorrow--I expect to be here and working for several months yet, and I'm planning to stay on the Board of Directors.

This is a tough note for me to write--I feel so incredibly lucky and humbled to have worked on such an amazing project, with such spectacular people, for the last few years.

But I've always been a start-up guy at heart--Mozilla was originally going to be a quick volunteer effort for me, but quickly turned into a full time job, and at the beginning of 2008 turned into the CEO job that I have now. I've really been missing working with start-ups, and want to learn how to invest in and build great new start-ups, so am planning to join Greylock Partners as a Venture Partner once we transition here.

I'm in no rush, and the most important thing to me is to build the strongest Mozilla we can, with the best leadership possible. So my plan is to stay through that transition--we're starting a CEO search now, and plan to do it in as transparent a way as possible-which means I'll continue in my CEO role as normal for several more months, at least.

I'll have more to say on the transition as we figure things out more clearly, but for now, business as usual. We've got Firefox 4 to ship, and Firefox on multiple mobile platforms. We've got our Web services like Weave to stand up and make available to millions of users.

For now, though, I really want to communicate a deep gratitude to each of you--over the past few years we've done an amazing amount together, and changed the world in so many meaningful ways. 400 million users are directly touched every day by the work we've done so far, and many, many more are using better browsers because of our work. There are many more contributions and victories to come.

John

And Lilly appeared onstage at the seventh D: All Things Digital conference last year, with Baker.

Here is the full video of their interview with Walt Mossberg at D7: