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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)

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b47eb52dad January 31 2014 at 8:26 PM

Nationality and ethnicity in corporate management have become essentially meaningless in this global economy. Period.

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jeanie36 January 31 2014 at 6:26 PM

Can't we hire a good man from inside the company that is a US man who has been waiting for a promotion all these years.
Thank you.
Jeanie36@aol.com

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Zach February 01 2014 at 7:35 PM

Don't be so anti-south Asian. They are going to hire the man they feel right for the job, the fact that he is not from the US is completely irrelevant, you must have grown up during a time of global isolation those times are over and the US is part of the global community. Sheesh.

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cfoster77 January 31 2014 at 6:26 PM

Bill,
I liked it better when you & friend were just working out of your Mom & Dad's garage.

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kate January 31 2014 at 6:13 PM

Where is the promised /check? LOL

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richvi12908 January 31 2014 at 4:55 PM

I think Obama is ruining our best educational asset by cutting the armed forces by 25%. Nowhere
is a man (or woman) in a position to learn than in the armed forces. A boy becomes a man; and a woman learns a trade that she was not likely to take up. They learn to fight too. No longer are they afraid to walk the streets.

I think that the army et.al. makes adults adept at vocations that they would never discover.

R. Frank

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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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lashou January 31 2014 at 4:42 PM

This guy might be a whiz, but I cannot believe that an American developed company cannot find an American whiz kid with the same credentials. I wonder how many American's are running India based companies in their native land. Why doesn't Microsoft abide by the "Made in America" idea.
I am a heavy stock holder and am not satisfied with my investment.

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tom January 31 2014 at 3:49 PM

Might as well select a person from India, being that is where customer support is.

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Drakenstien January 31 2014 at 4:49 PM

We live on "THE EARTH". Although Microsoft started in the US it is a GLOBAL corporation. That being said, he has become an American Citizen...legally. Although I can completely empathize when calling customer support and getting a person who introduces themselves in very stilted English as "Hello, my name is Jonathan. What can I do to help you." Bullsh

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lkhsvh January 31 2014 at 3:34 PM

Kind of sad....thought I might be a woman.

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sarahsloverlance January 31 2014 at 3:00 PM

How can a grown wear bangs?? He looks like child. One can only imagine the goings on in the bedroom of Bill and Melinda. It's likely populated with rocking horses, cribs, and nippled bottles.

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2 replies to sarahsloverlance's comment
Bill January 31 2014 at 3:31 PM

It's called a comb over as he is getting bald like many men do.

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1 reply to Bill's comment
Drakenstien January 31 2014 at 4:55 PM

Sad but true. But I thought the CO went away in the 90's. I'm 46 and have a healthy (albeit slowly receding) mop. But when the time comes I plan to own the dome. He either needs to own it or go to HAIR CLUB.

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stampman24 January 31 2014 at 6:37 PM

You just wrote like a "child" yourself, with those remarks!!!! Stampman24

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1 reply to stampman24's comment
Mac January 31 2014 at 8:47 PM

IMMATURITY RULES

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