Microsoft’s board is reportedly close to naming longtime company executive Satya Nadella as its new CEO – a move several analysts would greet with approval.
The report came Thursday from Bloomberg News, which also said the board is discussing replacing Bill Gates as chairman.
Bloomberg’s report, which cites people with knowledge of the process who asked not to be identified, said the plans have not been finalized.
Company spokesman Frank Shaw declined to comment on the report.
The board has not yet voted, and any official announcement would likely not come until this week, said Kara Swisher, co-executive director of online tech publication Re/code, in an online post.
Microsoft’s board has been searching since August for a successor to CEO Steve Ballmer, who announced then that he would retire within 12 months, upon the selection of a new leader.
Nadella’s name has been viewed as a leading candidate all along, even as other high-profile rumored candidates – including Ford CEO Alan Mulally, Qualcomm CEO-elect Steve Mollenkopf and Ericsson CEO Hans Vestberg – reportedly took themselves out of the running or fell by the wayside.
Nadella, 46, is a 22-year Microsoft veteran who currently heads its Cloud and Enterprise group, which provides servers, cloud platforms and other technology tools for corporations.
As such, he heads one of the company’s fastest-growing, most profitable divisions, and has been a key player in helping shape, articulate and execute Microsoft’s strategy for the cloud, the term used to refer to services and data that live on remote servers and which can be accessed by users online.
Last fiscal year, his division pulled in $20.3 billion in revenue and $8.2 billion in operating income.
Nadella played a big role in how Microsoft’s Windows Azure cloud services has become a viable competitor to Amazon Web Services.
Before that, he headed research and development for the Online Services division, responsible for overseeing engineering and technical innovations behind Bing, MSN and the company’s ad platforms.
He’s also worked at Microsoft in its Windows developer-relations and Business Solutions groups.
The board has made clear it was looking for a new CEO who understood Microsoft’s complex business model and had “the ability to lead a highly technical organization and work with top technical talent,” according to a December update from search committee chairman John Thompson.
Described as very smart, capable, collaborative and charismatic, Nadella possesses a deep knowledge of some of the most complicated technologies in business today, from industrial-strength servers to complex online services.
What he doesn’t possess is experience as chief executive of a company as huge and multi-tentacled as Microsoft.
“I don’t see that as a negative,” said Norman Young, a senior stock analyst with Morningstar investment research firms. “In many organizations, a division the size of (the one Nadella runs) would be its own company.
“He’s got charisma, employees like him, and he’s got the acumen to lead the company. Not having been a CEO is not necessarily a minus here.”
Nadella also has experience leading “a lot of high-profile, very profitable, very high-growth” divisions and projects within Microsoft, meaning a relatively smooth transition should he become CEO, Young said.
And, he added, “the good thing is that he will also have the mandate to implement change, if he desires.”
But whatever changes might come may not be as radical as some investors have been agitating for.
“Usually, when you name an insider, it means evolutionary or incremental change, not revolutionary change,” Young said.
Another possible disadvantage for Nadella is that he doesn’t have as much experience in consumer devices – something equally as important to Microsoft as cloud services as it works to become a “devices and services” company.
“You have to wonder what his plans or thoughts are for consumer hardware, the gaming consoles and consumer PCs in general,” Young said.
Trip Chowdhry, managing director of equity research for Global Equities Research, believes Nadella is the best of all the rumored shortlist candidates.
Nadella “has always been leading the projects at Microsoft that are future bets,” he said.
Plus, Chowdhry added, Nadella has a good track record with developers.
“If you cannot have the respect of the developers, any executive who comes into Microsoft would be dead in the very first minute,” he said. “You cannot be a successful CEO of a technology company if you are only hot air.”
Michael Yoshikami, fund manager with Destination Wealth Management, also believes Nadella would be a good choice: “He’s heading up a division that has massive revenue increases. He’s a longtime employee, so he understands the culture of Microsoft. And I think it would give a fresh perspective – he’s going to look at everything from a cloud perspective.
“That’s the direction that Microsoft needs to move to stay relevant – more of a subscription business.”
Born and raised in Hyderabad, India, Nadella worked at Sun Microsystems before joining Microsoft in 1992 as a program manager for the Windows developer-relations group. He was named vice president of Microsoft bCentral in 1999, corporate vice president of Microsoft Business Solutions in 2001, senior vice president of the Online Services division in 2007, and president of Server and Tools business in 2011.
He holds a bachelor’s degree in electrical engineering from Mangalore University, a master’s degree in computer science from the University of Wisconsin and a master’s degree in business administration from the University of Chicago.
Decision on Gates
Several analysts also said Thursday that it would not be a bad thing if Bill Gates were to step down as Microsoft chairman.
“Bill Gates built the company. And he built it in an era when building software and installing it is the way you made beautiful things, great things. The company was brilliant at it,” said Ted Schadler, software industry analyst for Forrester Research.
“But the world has changed – a lot,” he continued. “Today, the world is a lot more about delivery of software as a service.”
Gates and Ballmer have started the company moving in that direction, Schadler said.
But the issue is: Would a new CEO have the freedom to break with the old and go with the new at a faster pace?
“The problem with having Bill Gates and Steve Ballmer on the board, and having Bill Gates be the chairman, is it’s hard for the new CEO to make that clean break,” Schadler said.
The board may want Gates to step down as chairman to provide that break while retaining Ballmer on the board to, at least initially, advise and support Nadella, should he be named the CEO, Schadler said.
Chowdhry, the equity research director for Global Equities Research, said: “You don’t want the chairperson to be emeritus. You want the person to be hands-on.”
He’s equally unenthused about the idea of Microsoft board member Thompson, 64, taking over the chairmanship – one of the scenarios the board is considering, according to the Bloomberg report.
“Why can’t a 30-year-old be chairperson of Microsoft?” Chowdhry said. “You need a person who understands the future, not living in the past.”