There are many ways in which MS Excel can be stuck in compatibility mode. This means every time excel is opened the rich new features available in Microsoft Excel 2007 and Microsoft Excel 2010 cannot be used, like the number of rows available to use ending at 65,536. There are several ways available to fix this problem.
The easiest way to stop Excel from opening in compatibility mode is to change the start up options. To do this, open Excel and click on the Office Button.
Select the Excel Options button at the bottom of the menu. This will open a new window with the Excel Options. Select Save from the menu on the left.
Change the "Save files in this format:" from "Excel 97-2003 Workbook (*.xls)" to "Excel Workbook (*.xlsx)"
Click OK and restart Excel. The "Compatibility Mode" text should disappear from the top of the application.
If this does not work, and the "Save files in this format:" is set back to "Excel 97-2003 Workbook (*.xls)", then check with the network administrator. If the computer is set up on a domain, then there is a domain setting that may be forcing Excel into compatibility mode.
In Group Policy Management, Group Policy Object Editor, there are Office settings for the users on the domain. As can be seen below, a network administrator may set the compatibility mode for everyone on the network, or even narrow it to a specific group on the domain. These settings can only be changed by the network administrator.
There is a way around this for a user on the domain. I do not recommend this method because any time an Excel document is opened by double clicking a file or opening from an email, an additional file will open in the background that will have to be closed before exiting Excel.
To force Excel out of compatibility mode, first open Excel (Book1 [Compatibility Mode] should display by default). Click Save-As and save it as "Book1.xlsx" (the 2007 format) in the "C:\Program Files\Microsoft Office\Office12\XLSTART" folder. Restart Excel.
Excel will look in this location (based on where Excel is installed) for the default workbook it uses when starting up. Since it is saved in the 2007 format, Excel will no longer run in Compatibility Mode by default.