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Microsoft closes in on Nadella as new CEO

Microsoft Shareholders Meeting
(Reuters) - Microsoft Corp is likely to appoint its cloud-computing head, Satya Nadella, as its next chief executive, a source familiar with the matter said on Thursday, as the board concludes a five-month search for a tech-savvy heavy-hitter to lead the world's largest software company.

As part of the move, co-founder Bill Gates may step aside as chairman and be replaced by lead independent director John Thompson, said the source, speaking on condition of anonymity because the process is private. Gates would remain a director, the source added.

Bloomberg first reported the news on Thursday.

Rising star Nadella, a native of Hyderabad, India - where Microsoft has its largest non-U.S. research center - was promoted to run the company's fast-expanding cloud, or internet-based, computing initiatives in July last year as part of current CEO Steve Ballmer's radical re-organization of the company.

The appointment of the 22-year Microsoft veteran would make him the most powerful Indian-born tech executive in the world and put him alongside PepsiCo Inc's chief, Indra Nooyi, as the leader of a well-known, large-cap U.S. corporation.

Born in 1967 and educated in India and the United States, Nadella's tech career started at internet software pioneer Sun Microsystems. He joined Microsoft in 1992 and quickly climbed the corporate ladder with leading roles in the Office and Bing search-engine teams.

He was promoted to run the company's server and tools unit in 2011. That unit now forms the backbone of Microsoft's cloud-computing platform, which Nadella runs under his official title of executive vice president, cloud and enterprise.

"He's a solid choice," offering continuity of strategy and proven execution, said Sid Parakh, an analyst at fund firm McAdams Wright Ragen.

Some investors had campaigned for an external CEO who might be more likely to shake up the company and reward shareholders with greater dividends and share buybacks, but Parakh said that did not mean Nadella would be unpopular with Wall Street.

"Any new CEO is going to have to have the shareholders' say in mind. But it's not certain that will translate into actions," said Parakh.

If Nadella is named CEO, it is likely Thompson will help out on the crucial task of managing Microsoft's relations with its powerful Wall Street investors, the source said.

Nadella has little experience of that aspect of the job, and Ballmer and Gates did not prioritize it. Gates would likely focus on technical innovation in any new role, the source said.

There have been calls for months for Gates to step down from investors who believe Microsoft's co-founder is a block to radical change and investor-friendly moves.

Ballmer, who plans to retire as soon as a new CEO is named, was reelected to the board in November, but it is not clear how long he will remain there after retirement, the source said.

Several people briefed on the CEO search process had previously told Reuters that Microsoft was down to a handful of candidates, including Nadella and Tony Bates, executive vice-president of business development, plus at least one external candidate.

The board still has not met to finalize Nadella's offer and nothing has been signed, the source said. Microsoft declined to comment.

Microsoft shares rose 0.8 percent to $37.15 after hours, after gaining slightly in regular Nasdaq trading.

LONG SEARCH

Microsoft's CEO search has taken longer than most expected when Ballmer said last August he would retire within a year.

In a blog post on the company's website in December, Thompson emphasized the need for a CEO with "an ability to lead a highly technical organization and work with top technical talent".

Thompson, who leads the four-member CEO search committee, said at the time he expected the panel to reach a decision "in the early part of 2014".

The appointment of a company veteran like Nadella, which follows a flirtation with outsiders such as Ford Motor Co Chief Executive Alan Mulally, could disappoint some investors who want a more radical transformation at the software giant.

"While many on the Street are now expecting Mr. Nadella to get the CEO spot, we believe filling this position with a core Microsoft insider will disappoint those hoping for a fresh strategic approach (e.g. potential breakup of enterprise/consumer, Xbox spin off) an outside executive could have brought to the table," FBR analyst Daniel Ives said in a research note, adding that innovation and fresh strategies were needed.

"With that said, we believe Mr. Nadella's prior roles in the Online Services Division, Business Division and most recently as president of the Server and Tools business position him as a strong internal candidate with a broad set of knowledge around Microsoft's massive product portfolio," Ives wrote.

(Reporting by Bill Rigby; Editing by Bernard Orr and Andrew Hay)

Join the discussion

1000|Char. 1000  Char.
madigan229 January 31 2014 at 4:52 PM

Indians are beating the Chinese for top tech offices. Wonder where the American, British and the Australian stand. (Show us a chart). Both Indians and the Chinese youngsters have strong family life and support, That calls for decipline, and hard work for achieving something higher. Congratulations Mr. Nadella.

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brennemanbelkin January 31 2014 at 9:42 AM

Don't care who the CEO is, somebody please find the person who subjected us to Windows 8 and kick him in the nads.
(Truth is, they never improved on 98)

Flag Reply +7 rate up
1 reply
israelkickbum brennemanbelkin January 31 2014 at 10:44 AM

the Windows 8 guy needs to be deported even if America. Windows 7 works good so they improved it by killing it. Only at Microsoft.

Flag Reply +1 rate up
hathor38 January 31 2014 at 2:12 PM

MicroSoft could'nt find an US citizen as good as Mr. Nadella? Why is it that for over 20 yrs USA companies find more qualified employees from other countries than US citizens? Something is wrong!

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1 reply
lmi3280257 hathor38 January 31 2014 at 2:22 PM

Mr. Nadella IS a US citizen. Why do companies need to look abroad for qualified candidates?????? It's obvious - the education system here in the United States is lousy.

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Alan January 31 2014 at 11:56 AM

Not the best choice.

Flag Reply +1 rate up
Richard January 31 2014 at 8:02 AM

Maybe now the will produce an OS that works.

Flag Reply +1 rate up
wp41e January 31 2014 at 8:48 AM

Either microsoft will be moving it's world HQ and all operations to india real soon or they will be importing 50,000 indian slave-laborers to write microsoft crapware..... I'm glad I switched to Linux

Flag Reply +5 rate up
Nan Sharp January 31 2014 at 1:34 PM

What is wrong with "Made in America?" We have so many not-so-friendly people surrounding us that we, the people, could really suffer at their hands. Just saying.

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1 reply
Drakenstien Nan Sharp January 31 2014 at 5:04 PM

Nothing at all. Since Satya Nadella became an American Citizen (legally), you can sleep peacefully. After all he is one of WE, THE PEOPLE.

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palitzca January 31 2014 at 1:35 PM

i would vote for bill gate for pres of usa

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2 replies
BONNA HEANEY palitzca January 31 2014 at 1:57 PM

He is a far left liberal ! With him our 16 trillion would become 100 trilllon in the hole !

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madigan229 palitzca January 31 2014 at 5:00 PM

But why? He doesn't need party politics.

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my80z28 January 31 2014 at 12:07 PM

Hmmm do we see a pattern evolving here - heads of some of our most major companies are not from the USA !!!! How about hiring AMERICANS!!

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3 replies
Iris January 31 2014 at 12:22 PM

Just move their tech phone anserers to The good ole USA.
That goes for all the tech companies and others, who have the phones answered by people who read Just scripts.
No wonder we have high unemployment still..

Flag Reply +4 rate up
1 reply
theshiva3 Iris January 31 2014 at 12:34 PM

For real

Flag Reply +2 rate up
1 reply
theshiva3 theshiva3 January 31 2014 at 12:34 PM

The United States of India / China

Flag +4 rate up
aol~~ 1209600

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