Microsoft To Name Satya Nadella As CEO, May Remove Bill Gates As Chairman

Microsoft To Name Satya Nadella As CEO, May Remove Bill Gates As Chairman [Report]

STEVE KOVACH

JAN. 30, 2014, 5:37 PM 20,826 24

Satya Nadella

Microsoft has chosen its next CEO and may remove Bill Gates as chairman, Bloomberg reports.

Bloomberg says Microsoft’s next CEO will be Satya Nadella, an executive vice president at the company. Nadella is in charge of Microsoft’s lucrative cloud and enterprise group.

The news backs up an earlier report from Recode’s Kara Swisher that Microsoft will pick Nadella as its CEO.

Nadella has been at Microsoft for 20 years and his name has been consistently floated around as one of the top internal candidates for the CEO job.

Before Microsoft’s recent executive reorganization, Nadella was in charge of the company’s server and tools business. He also worked in research and development for online services and was vice president of the business division.

It would make sense if Gates stepped down as chairman of the board. In theory, Microsoft’s new CEO probably wouldn’t want two of his or her predecessors (Gates and current CEO Steve Ballmer) watching everything from the board.

Microsoft began its CEO search in August 2013, when Ballmer announced he planned to retire within a year. Since then, people began throwing around several names for Ballmer’s replacement, including Ford CEO Alan Mulally. Mulally later came out and publicly stated he would not take the CEO job at Microsoft. Other potential internal candidates were Tony Bates, VP of business development, and Stephen Elop, the former CEO of Nokia who joined the company after it sold to Microsoft.

Early reactions to the potential Nadella appointment seem to be pretty positive. Aaron Levie, CEO of cloud storage startup Box, tweeted: “Satya is a very strong pick for CEO. [He] understands how to build platforms, gets the cloud, and has a solid vision for the future.”

Microsoft Said to Be Preparing to Make Satya Nadella CEO

By Dina Bass, Peter Burrows and Jonathan Erlichman – Jan 30, 2014

Microsoft Corp. (MSFT)’s board is preparing to make Satya Nadella, the company’s enterprise and cloud chief, chief executive officer and is discussing replacing Bill Gates as chairman, according to people with knowledge of the process.

One person the board is considering to take the place of co-founder Gates as chairman is Microsoft lead independent director John Thompson, said the people, who asked not to be identified because the process is private. Even if Gates steps down as chairman, he may be more involved in the company, said two people familiar with the matter, particularly in areas like product development.

Nadella, 46, emerged as one of the stronger candidates to replace departing CEO Steve Ballmer, 57, weeks ago, people familiar with the search have said. The plans aren’t final, said the people.

The leadership changes would take place at a crucial point as Microsoft moves away from its roots as a software maker to focus on hardware and Internet-based services. Rivals such as Apple Inc. have shifted the technology landscape away from Microsoft’s mainstay of personal computers to mobile devices. Ballmer, who said he would retire by August, last year revamped Microsoft’s organizational structure and agreed to buy Nokia Oyj’s handset business for $7.2 billion.

Over the past decade, Microsoft’s stock has gained 74 percent including dividends, compared with a 93 percent rise in the Standard & Poor’s 500 Index. Shares rose less than 1 percent today to close at $36.86 in New York.

Frank Shaw, a spokesman for Microsoft, declined to comment.

Two CEOs

Microsoft has only had two CEOs — Gates and Ballmer — in its history. In turning to Nadella, the company would get an enterprise-technology veteran who joined Microsoft in 1992 and has had leadership roles in cloud services, server software, Internet search and business applications.

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 overhauled Microsoft’s structure in July to focus the company on devices and services.

Michael Cusumano, a professor at MIT’s Sloan School of Management, said Nadella is a good choice given his close ties and strong reputation within Microsoft’s huge engineering corps.

“Microsoft is a contentious enough place that you wouldn’t want to bring in someone who lacked credibility with the engineers,” Cusumano said.

Chairman Gates

A bigger shift would be if Gates vacates the chairman role that he has held for years, said Daniel Ives, an analyst at FBR Capital Markets. Gates has been chairman since 1981. Going with an insider for CEO would necessitate turning to an outsider for chairman, Ives said.

“If they are going for the CEO who is right down the hall from Steve Ballmer, you’ve got to give investors a bone,” said Ives, who has the equivalent of a hold rating on the stock. “It would obviously be a big change and a historic change but it’s obvious Microsoft needs change in terms of strategy in terms of the next leg of growth.”

Philanthropic Endeavors

Earlier this month, Gates, 58, who has devoted much of his time to the Bill & Melinda Gates Foundation and charitable efforts, told Bloomberg Television that he will work on philanthropy full time for the rest of his life and contribute part time as a board member of the software maker.

“The board is doing important work right now,” said Gates, who created the foundation with his wife in 2000. “The foundation is the biggest part of my time. I put in part-time work to help as a board member. My full-time work will be the foundation for the rest of my life. I will not change that.”

If Thompson, 64, takes over as chairman, Microsoft would have a more than 40-year technology executive in the role. Thompson was a longtime International Business Machines Corp. executive before joining technology-security company Symantec Corp. (SYMC) in 1999. He took the company from $600 million to $6 billion in sales over a decade-long tenure, before stepping down in 2009. Thompson currently runs Virtual Instruments Inc., a San Jose, California-based maker of software that tracks application and hardware performance.

Thompson joined Microsoft’s board in 2012 and has asked tough questions of top executives including Ballmer, people familiar with the situation have said. That helped to create an environment that sped Ballmer’s decision to retire by this August, the people have said.

Five-Month Search

The leadership changes would cap a five-month search that has been dogged with difficulties. Thompson, who is heading the CEO search, wrote in a blog post last month that the board planned to complete a search for CEO in the “early part of 2014.” He said the board started with more than 100 candidates.

The company considered internal candidates including Executive Vice President Tony Bates and Chief Operating Officer Kevin Turner. External candidates have included former Nokia CEO Stephen Elop, Ford Motor Co. CEO Alan Mulally, Qualcomm Inc. CEO-elect Steve Mollenkopf and Ericsson AB CEO Hans Vestberg, people familiar with the search have said.

Some CEO candidates have declined to be considered or dropped out of the running. Vestberg has said he plans to stay at Ericsson. Mulally took himself out of the running earlier this month.

To contact the reporters on this story: Dina Bass in Seattle at dbass2@bloomberg.net; Peter Burrows in San Francisco atpburrows@bloomberg.net; Jonathan Erlichman in New York at jerlichman1@bloomberg.net