Microsoft board ‘close’ to naming Nadella as new CEO

Microsoft is likely to appoint its cloud-computing head, Satya Nadella, as its next chief executive, a source familiar with the matter said, 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. Mr Gates would remain a director, the source added.

Rising star Nadella (46), a native of Hyderabad, India - where Microsoft has its largest non-US research centre - 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-organisation 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’s chief, Indra Nooyi, as the leader of a well-known, large-cap US corporation.

Born in 1967 and educated in India and the United States, Mr 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 Mr Nadella runs under his official title of executive vice president, cloud and enterprise.

He emerged as one of the stronger candidates to replace departing CEO Mr Ballmer (57) weeks ago. 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 have shifted the technology landscape away from Microsoft’s mainstay of personal computers to mobile devices.

“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 Mr Parakh said that did not mean Mr 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 Mr Parakh.

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

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

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

Mr Ballmer, who plans to retire as soon as a new CEO is named, was re-elected 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 Mr Nadella and Tony Bates, executive vice-president of business development, plus at least one external candidate.

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

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

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

In a blog post on the company’s website in December, Mr Thompson emphasised the need for a CEO with “an ability to lead a highly technical organisation and work with top technical talent”.

Mr 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 Mr Nadella, which follows a flirtation with outsiders such as Ford 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 (eg 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. (Reuters)