Microsoft names Nadella as CEO; Gates out as chairman

Microsoft on Tuesday named Satya Nadella as its new chief executive, betting that the veteran company insider can revamp the firm at a time when it has fallen out of step with consumer tastes.

Nadella will succeed Steve Ballmer to become the third chief executive of the tech giant in its nearly 40-year history. Born in Hyderabad, India, he will also emerge as one of the few ­high-level,­ Indian-born executives of an American company.

As part of the management shuffle, Bill Gates will step down as chairman of the board and become a “technology adviser” to Nadella. Longtime Microsoft board member John Thompson, who led the CEO search, will assume the role of chairman.

Nadella’s appointment culminates a lengthy search that reportedly focused on outside candidates who could infuse the tech giant with a new vision. But Nadella, who has been at the company 22 years, emerged as a top internal candidate as supporters pointed to his success in pushing some of the company’s main business customers into the cloud era.

That experience will be key as Microsoft looks to remake itself as consumers move away from the desktop that has been its core market for decades. Microsoft already lags far behind Apple and Google in the world of smartphones and tablets, and Nadella will have to prove quickly that he can jump-start the company’s mobile effort to quiet critics who wanted an outside candidate to take the helm.

The new Microsoft CEO praises the company’s past innovations but stresses its reinvention. (Reuters)

“The main issue around Microsoft is its need for innovation and a set of fresh new strategies to drive the next leg of growth,” FBR Capital Markets said in a note Tuesday.

In an e-mail to employees, Ballmer defended the choice. “Satya is a proven leader. He has a remarkable ability to see what’s going on in the market, to sense opportunity, and to really understand how we come together at Microsoft to execute against those opportunities in a collaborative way,” he said.

Nadella quickly signaled that his history as a company insider does not mean that the firm should not prepare for change. “Every one of us needs to do our best work, lead and help drive cultural change,” he said in an e-mail to employees. “We sometimes underestimate what we each can do to make things happen and overestimate what others need to do to move us forward. We must change this.”

Gates, who stepped down as chief executive in 2000, said he would be “devoting more time to the company” in his new advisory role.

That could help reassure investors concerned that Nadella lacks the experience to oversee the company’s work on consumer devices, including the Xbox line of gaming consoles and Nokia smartphones, which Microsoft purchased last year.

Critics have noted that Nadella does not have much experience in the retail sector and selling directly to consumers.

Gates’s close association with the personal computer is, in some ways, exactly the opposite of what Microsoft needs, which is to shift away from that slumping market, analysts have said. And then there is the matter of Gates’s personal influence on the company, which may have waned since he stepped down but at the time was so strong that it may have stifled creativity.

“The problem with Gates taking on that role is suspicions that he’s played a larger role in the company over the last few years than people think, and that he bears a lot of responsibility for the trouble Microsoft is in today,” said Michael Silver, a Gartner analyst.

Investors withheld judgment Tuesday, leaving the company’s stock nearly unchanged. It closed at about $36 a share, down less than 1 percent.

Hayley Tsukayama covers consumer technology for The Washington Post.
Brian Fung covers technology for The Washington Post.
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