Reportedly, the world's largest software maker
) plans to appoint an internal expert, Satya Nadella, as the new
chief executive officer (CEO).
As part of the move, the board may also decide to replace
co-founder Bill Gates as chairman of the board with John
Thompson, Microsoft's lead independent director.
The 46-year old Nadella joined Microsoft in 1992. He climbed
the ranks over the years and was appointed as the head of the
server and tools unit in 2011. In July 2013, Nadella was
appointed the executive vice president, Cloud and Enterprise, -
the company's fast-expanding cloud computing business as a part
of Microsoft's initiative to restructure its business.
According to sources, some investors preferred an outsider for
the CEO position as aggressive moves could have helped Microsoft
stay abreast of the rapidly-changing tech landscape.
Additionally, they contend that Nadella lacks experience as a
chief executive, unlike internal rival Tony Bates and external
candidate Alan Mulally. Therefore, it remains to be seen whether
Nadella can actually bring Microsoft back on the growth path.
Despite being one of the biggest brands, Microsoft's Windows
business is being battered by the slump in the PC market. This
may be attributed to the increasing customer shift toward
tablets, smartphones and hybrids.
Therefore, Microsoft's current CEO, Steve Ballmer, who will
retire soon, reorganized the business units in an attempt to
better compete with other technology companies like
) in the fast-growing mobile and cloud computing markets.
Ballmer responded to the changing dynamics with the launch of
innovative products such as the Surface tablets, which, although
making some progress, continue to struggle because of very strong
competition. The company is also focused on app creation, which
is essential for success in the mobile segment. But shareholders
looking for radical changes could want the devices and services
sides split up and Nadella is not expected to go for such
On the other hand, Nadella is a steady hand who has working
relationships with the engineers, so there is likely to be more
confidence in him from the inside.
In any event, restoring the company's position as well as
shareholders' confidence will be an uphill task for Ballmer's
successor. The new CEO has his work cut out: he has to deliver on
both the services side (high-growth, high-margin prospects) and
the devices side (very competitive, low-margin prospects, but
strategically important). And all eyes will be on him.
Microsoft's shares currently carry a Zacks Rank #3 (Hold).
Another stock in the sector that is performing well is
), with a Zacks Rank #2 (Buy).
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