Microsoft shares were up about 1.7% to $37.11 in early morning trading following the news.
Previously executive vice president of Microsoft’s cloud and enterprise group, Nadella joined the company in 1992. In an email to employees Tuesday morning he wrote, “Today is a very humbling day for me. It reminds me of my very first day at Microsoft, 22 years ago. Like you, I had a choice about where to come to work. I came here because I believed Microsoft was the best company in the world.”
Nadella, 46, goes on to say that this feeling continues to inspire him today.
Since taking up full time residence in Bellevue, Washington Nadella has lead strategy of several products including the cloud and cloud infrastructure which supports search engine Bing, gaming system Xbox and the brand’s ubiquitous suite of Office products.
“During this time of transformation, there is no better person to lead Microsoft than Satya Nadella,” said Bill Gates, the company’s billionaire founder and original CEO, in a statement. “Satya is a proven leader with hard-core engineering skills, business vision and the ability to bring people together. His vision for how technology will be used and experienced around the world is exactly what Microsoft needs as the company enters its next chapter of expanded product innovation and growth.”
Outgoing CEO Steve Ballmer said in the statement, “Having worked with him for more than 20 years, I know that Satya is the right leader at the right time for Microsoft.”
During Ballmer’s 14 year tenure the once pioneering company has been accused of lost relevancy. AsApple AAPL +1.81% has claimed personal computer and industry dominance, Microsoft has been seen as falling behind on key developments like social media. Ballmer also noted, “I’ve had the distinct privilege of working with the most talented employees and senior leadership team in the industry, and I know their passion and hunger for greatness will only grow stronger under Satya’s leadership.”
Kim Forrest, senior equity analyst at Fort Pitt Capital Group and a former software engineer, says that in the short term the financial community is going to be disappointed because the appointment will not be a quick fix. She is not. A longer term and value oriented manager, Forrest is thrilled Microsoft chose an inside guy. “The board has probably given this a great deal of thought,” she says. “They understand just how complex a. the company is and b. how complex it is to make software.”
Speculation abounded that the software company planned to offer Ford Motor CEO Alan Mulally the job. An idea Forrest saw as unwise. “Although you are building things, it is happening in peoples’ minds for the most part. To really understand how all the little parts fit together you have to really understand who all the people are making the software, who the product managers are, all that kind of stuff. Having an inside guy, not needing to learn who’s who and what they do is huge.”
She also notes that most of Microsoft’s money comes from enterprise sales, with consumers as a bonus. Nadella’s background going after big markets impresses her. “Their computers would look very different and act very different – hey maybe more like Apple – if they were more consumer oriented. It’s good that they understand themselves, where their money comes from and where their money is probably going to come from in the future.”
The company also announced that Gates, who has served as chairman of the board since stepping down from the CEO job in 2000, will leave that role. He will take on a new board role as founder and technology advisor. John Thompson, lead independent director of the board, will become chairman and remain an independent director. Ballmer will stay on as a member of the board.
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