Microsoft names Satya Nadella new CEO

Bloomberg NewsFebruary 4, 2014 


Satya Nadella, Microsoft’s new CEO, addresses employees Tuesday along with Bill Gates, left, and Steve Ballmer on the company’s campus in Redmond, Wash. Gates and Ballmer remain as directors.


— Microsoft named Satya Nadella chief executive officer, tapping an insider steeped in business technology to speed a turnaround at a software maker that helped usher in the personal-computing age, only to be left behind as the world shifted toward the Web and mobile devices.

Nadella, 46, is replacing Steve Ballmer effective immediately after a five-month search, Microsoft said in a statement Tuesday. Bill Gates, the company’s first CEO, will step aside as chairman, devote more time to product development as a director and continue running his philanthropic foundation. John Thompson, the director who led the CEO search, becomes chairman.

The new CEO, who was born in India and joined Microsoft in 1992, takes over at a critical juncture. Consumers and businesses are shunning PCs in favor of handheld devices made by rivals, sapping demand for Microsoft’s flagship products. Besides playing catchup to the likes of Apple and Google, Nadella will be tasked with completing strategy changes, begun by Ballmer last year. That includes integrating the $7.2 billion integration of Nokia Oyj’s handset unit and turning Microsoft into a provider of services and hardware.

“He’s really the complete package: He has incredible intellect, but he also combines that with a deep curiosity and willingness to learn,” said Doug Burgum, who sold business-software developer Great Plains to Microsoft and oversaw Nadella while at the Redmond, Wash.-based company.

While Nadella brings experience in cloud and enterprise businesses, he’ll need to boost Microsoft’s presence in consumer markets, where rivals have seized the lead. The first question on the minds of critics is whether the Microsoft veteran of 22 years can deliver the same fresh thinking as an outsider, said Daniel Ives, an analyst at FBR Capital Markets & Co.

“He has all the qualifications to take over, but the question for investors is will he be able to change things up,” said Ives, who rates Microsoft the equivalent of a hold.

Role of board key

Much will depend on the role of Microsoft’s board, where former CEOs Gates and Ballmer will remain directors. Thompson, the former Symantec CEO and IBM executive, also brings a new perspective.

“During this time of transformation, there is no better person to lead Microsoft than Satya Nadella,” Gates said in the statement.

The transition at Microsoft follows the worst decline on record for PCs in 2013, when shipments dropped 10 percent and are projected to languish through 2017. Microsoft’s revenue growth has averaged 9.4 percent in the last 10 years, compared with 24 percent during the prior period.

The new CEO will oversee a sprawling empire of 130,000 employees once the Nokia acquisition closes in the next few months. Microsoft is seeking to remain relevant as consumers turn to mobile devices and the Web to check email and access data, putting the brakes on sales of PCs, the main driver of Microsoft’s Windows and Office software. The acquisition of Nokia is aimed at speeding up the transition to devices and services.

In 2012, Microsoft’s Windows operating system had 19 percent of the consumer-computing market, according to Goldman Sachs, down from 93 percent in 2000 when PCs were prevalent. In tablets and smartphones, Microsoft has less than 5 percent share of each market, according to researcher IDC.

Nadella, who was at Sun Microsystems before joining Microsoft, has worked on business software and services through much of his career.

Led move to the cloud

Nadella accelerated the move to Internet-based computing and worked to better connect cloud software with Microsoft’s programs for internal corporate networks. Nadella also promoted interoperability with rival programs and helped strike a deal to offer Oracle’s competing database software on Microsoft’s Windows Azure cloud service.

“Satya has the rare combination of technological depth, business savvy and strong people-leadership skills,” said Jeff Raikes, a former Microsoft executive and CEO of the Bill & Melinda Gates Foundation.

As president of Microsoft’s server business, Nadella boosted revenue to $20.3 billion in the fiscal year through June, up from $16.6 billion when he took over in 2011. That unit became cloud and enterprise when Ballmer revamped Microsoft’s structure in July.

Before being named to lead the server unit, Nadella held leadership roles in several different businesses within Microsoft, including Bing search engineering and technical strategy, and the company’s small business applications push.

“I couldn’t be more honored to have been chosen to lead the company,” Nadella said in the statement. “The opportunity ahead for Microsoft is vast, but to seize it, we must focus clearly, move faster and continue to transform.”

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