Nadella named CEO as Microsoft seeks to evolve

nadella

Satya Nadella has been confirmed as Microsoft’s new CEO. Nadella, a 22-year veteran of the company, will succeed outgoing CEO Steve Ballmer immediately. Microsoft co-founder Bill Gates has also stepped down from his position as chairman of the company, and has taken up a new role as technology advisor.

The shakeup at Microsoft ends months of speculation over who would take the top job after Ballmer announced his intention to retire in August last year. John W. Thompson, who led the search for the next CEO, has replaced Gates as chairman of the company.

Nadella, born in India and a keen cricket fan, played a leading role in transforming Microsoft’s cloud business.  Before accepting the CEO job, he was head of Cloud and Enterprise at Microsoft. Nadella joined the company in 2002 and holds degrees in computer science, business administration and electronics.

The new CEO has no experience running a company, and starts out with one of the largest in the world. But he does have the backing of the company’s founder. “Satya is a proven leader with hard-core engineering skills, business vision and the ability to bring people together,” Gates said in a company statement. “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.”

Nadella’s performance as head of the cloud division of Microsoft has been impressive. The company’s commercial cloud services segment reported revenues up 107 percent in the latest fiscal quarter, compared to the same period a year earlier. Over the whole fiscal year, Nadella’s division accounted for $8.2 billion in operating income and $20.3 billion in revenue.

However the new CEO does not have experience in one of Microsoft’s key new areas — mobile devices. The acquisition of Nokia led many to believe that Stephen Elop, formerly CEO of the Finnish mobile company, was the favorite to take the top job at Microsoft. Elop has experience running a major public company and expertise in mobile devices. Although he has been overlooked for the CEO position, Elop still heads up the devices and services division of Microsoft.

Nadella faces a number of challenges in his new role. Microsoft has fallen behind the likes of Apple and Google of late, and one of the company’s most successful products, the Windows operating system, has seen a drop in performance due to the fall year-over-year of PC shipments. Worldwide PC shipments are expected to fall by 10.1 percent in 2013, according to research from IDC, which also predicts PC shipments will bottom out at 300 million and will reach 305 million by 2017. As user migrate away from PCs to tablets and smartphones, the need for operating systems such as Windows falls, and many have moved to Google Android or iOS.

The new CEO will need to make some big decisions as the company increasingly moves towards more profitable territory. Nadella is perfectly positioned to lead the company further into the cloud, and Elop’s experience will be vital in ensuring the Nokia acquisition is a success. But Nadella will also have to make a call on the future of the search engine Bing and the company’s XBox division, which reports have suggested may be sold in the near future.

The appointment of Nadella doesn’t bring about the large scale overhaul many pundits predicted was necessary at Microsoft. Gates has said he will be taking a more active role in the company in his new role and an internal appointment for the CEO role suggests the company is aiming for an evolution, rather than a revolution. Nadella’s task is huge, and his work starts immediately. Investors will be watching closely to see how he can maneuver Microsoft back to the front of the pack.