Microsoft (NASDAQ:MSFT) is poised to name Satya Nadella as its next CEO to replace the outgoing Steve Ballmer, according to multiple reports. The move, if confirmed, would elevate the company's cloud and enterprise chief to the top spot at a time when the company is focusing more on consumer hardware, epitomized in its $7.4 billion deal to buy Nokia's (NYSE:NOK) handset business.
The news was first rumored by Re/code and then multiple news outlets, including Bloomberg, the Wall Street Journal and Reuters followed on. The reports have cautioned that Microsoft's board has not yet made a final decision. Microsoft has declined to comment.
According to the reports, Microsoft's board is also considering removing founder Bill Gates as chairman, and replacing him with John Thompson, Microsoft's lead independent director who led the CEO search process.
Ericsson's (NASDAQ:ERIC) Hans Vestberg, Qualcomm's (NASDAQ:QCOM) Steve Mollenkopf and Ford Motor Co.'s Alan Mulally have been discussed as Microsoft CEO candidates, but each has said they won't accept the position. Former Nokia CEO Stephen Elop, a former Microsoft executive who will return to Microsoft through the company's purchase of Nokia's handset business, was also considered a possibility.
Nadella is a 22-year Microsoft veteran who in June was elevated to his role as cloud-computing chief as part of a reorganization deigned by Ballmer. One unnamed person familiar with the matter told the Journal, "It's a conservative board and they are leaning toward the conservative choice."
Yet as Microsoft moves into being both a software and hardware company, analysts and investors question whether an insider like Nadella can shake things up at the company and allow it be more agile as it competes with Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL) in smartphones and tablets.
"Can a Redmond insider like Satya take out the whiteboard and look at it with a fresh view and be willing to make the changes needed, whether it's in mobile or the tablet?" FBR Capital Markets analyst Daniel Ives told Bloomberg. "He has all the qualifications to take over, but the question for investors is will he be able to change things up."
One of Nadella's largest challenges will be successfully integrating Nokia and 32,000 new employees into the fold. Nokia is Microsoft's largest Windows Phone partner; however, Nokia's Lumia Windows Phone sales dipped in the fourth quarter to 8.2 million units, down from 8.8 million in the third quarter.
Interestingly, Google (NASDAQ:GOOG) is now retreating from the exact strategy that Microsoft is engaging in through its Nokia purchase. Android provider Google purchased Motorola in 2011 but earlier this week announced it will sell the business to Lenovo for $2.91 billion.
Google's Motorola adventure could serve as a cautionary tale for Microsoft, analysts said. "There's no point in having a hardware unit inside a software company unless you marry the two the way Apple does," Michael Cusumano, a professor at Massachusetts Institute of Technology's Sloan School of Management, told Bloomberg. He said Microsoft might sell the unit off later if it does not work out, though it's unclear which company would buy Nokia's handset unit.
Nokia sold around 80-90 percent of all Windows Phones in 2013. "Google did not need to buy Motorola," Current Analysis analyst Avi Greengart told Bloomberg. "I don't think Microsoft had much choice."
Microsoft declined to comment. However, Windows Phone Director Greg Sullivan expounded on the path Microsoft has chosen with its Nokia purchase in an interview with FierceWireless earlier this month. "There used to be this notion that a platform provider was either first-party, vertically integrated [company] or third-party horizontal," he said. "The world is different now. And in fact, maybe the best way to be a platform provider is to understand at a very intimate level what it means to be a device manufacturer."
- see this WSJ article (sub. req.)
- see this Reuters article
- see this Bloomberg article
- see this second Bloomberg article
- see this third Bloomberg article
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