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As CEO hunt winds down Satya Nadella -- Microsoft's current cloud chief -- is leading the pack

The hunt for Microsoft Corp.'s (MSFT) third CEO is nearing a close, after 160 days.  And according to Kara Swisher, the former All Things D blogger now with Re/Code, the leading candidate is a fresh face that many readers may be unaware of.
 
I. A Tough Job Ahead
 
According to Ms. Swisher:

[A]at this moment, those who have watched the process think that insider Satya Nadella, who is currently leading its enterprise effort, is the likeliest internal candidate to prevail.

That’s due to a number of reasons, including his familiarity with the company, where he has spent much of his career, as well as a strong technical background and a varied work history at Microsoft.
...

The two other insiders — strategy head Tony Bates and Nokia leader and former Microsoft exec Stephen Elop — seem further behind. But while sources said they have not been updated recently as to their status in the search, neither has been told he is out either as yet.

The new CEO -- whoever it may be -- will have a tough task ahead in restoring Microsoft's image.  While Microsoft remains a giant of the electronics industry, it stumbled with early mistakes in its launch of the Xbox One.  While it eventually tried to win customers back and undo unpopular decisions, the struggles echoed the troubled Windows 8 platform
 
PC sales have seen record drops after some customers gave the radical overhaul to the start-menu UI the thumbs down.  OEMs have returned to installing Windows 7 on new machines, an embarrassment for Microsoft that recalls the Vista debacle.

Steve Ballmer, CES
Steve Ballmer gives the audience a little slice of his reality at CES 2011.
© Jason Mick/DailyTech 2011

Those struggles, in part, forced CEO Steve Ballmer to announce his early retirement in an attempt to placate irate shareholders.  Mr. Ballmer exits Microsoft having held the CEO post for 14 years.  His predecessor and company co-founder, William Henry "Bill" Gates III, had held the post for 24 years.
 
The CEO hunt -- led by Mr. Gates -- was rumored initially to be focusing on Ford Motor Comp. (F) CEO Alan Roger Mulally.  But after multiple denials, it appears that an exasperated Mr. Mulally was being forthright -- he is uninterested in leaving Ford to take the reins at his current company's troubled business partner.
 
Likewise, other outside candidates -- including Qualcomm Inc.'s (QCOM) Steve Mollenkopf and Ericsson AB's Hans Vestberg -- seemed uneager to take on the challenge of reinventing Microsoft.  One rumored outside candidate who hasn't yet been ruled out is VMWare, Inc. (VMW) CEO Pat Gelsinger.  But while he may be a good fit personality-wise, his company is only about an eighth the value of Microsoft in market-cap.
 
Of the internal candidates, Mr. Nadella has been with the company the longest.  He joined Microsoft in 1992, having previously worked at Sun Microsystems.  While largely a quiet, behind-the-scenes leader, Mr. Nadella is seen as one of the more forward-looking leaders at the company.  Having started in the R&D unit of the business division, he helped to lead Microsoft's push into the emerging cloud computing market, earning a promotion to President of Servers & Tools in the process.

Satya Nadella
Satya Nadella, Microsoft's cloud chief

Born in Hyperabad, India in 1967, Mr. Nadella holds degrees from University of Wisconsin–Milwaukee (Master's deg. in Comp. Sci), The University of Chicago (MBA), and India's Manipal University (Bachelor's deg. in Electronics/Communications).  If Mr. Nadella receives the nod, he'll join the small, elite group of Indian-born CEOs who head major U.S. companies.

Of the internal competition, Anthony J. "Tony" Bates has been with Microsoft the shortest time.  He joined the company when it acquired Skype for $8.5B USD in May 2011.  He had served as CEO at Skype and is currently in charge of business, strategy, and evangelism at Microsoft.
Tony Bates
Tony Bates, Microsoft business/strategy/evangelism head

At age 50, Stephen Elop is the oldest of the three leading internal candidates.  He currently leads Microsoft's devices division.  He first joined Microsoft back in early 2008, working as the head of the business division.
 

Stephen Elop
Stephen Elop, Microsoft's Devices Chief

He's worked at a number of firms, notably holding the CEO spot at Macromedia (before its sales to Adobe Systems Inc. (ADBE)) and at Nokia Oyj. (HEX:NOK1V).  Some would argue that he delivered Nokia's devices unit to Microsoft and may earn extra consideration for that achievement.

III. Weary From the Hunt

The long hunt has taken its toll on Microsoft employees.

Ms. Swisher quotes one "high-ranking exec" as saying:

We aren’t doing anything but waiting.  No one knows what the new CEO will want, so no one knows what to do.

Another states:

[We're in] stasis, all depending on who gets the nod.

Ms. Swisher claims relief may soon arrive, though.  She says the CEO selection may come "within the next week", adding that the committee's has "a goal to announce [the pick] in early February."

Microsoft Redmond HQ
Microsoft employees shuffle along at the company's headquarters in Redmond, Wash.
[Image Source: AP]

Microsoft reported its results last week.  Despite "continued softness in the consumer PC market", it beat analyst expectations on strong business sector performance and the launch of the Xbox One, which sold 3.9 million units during the holiday season.  Microsoft pocketed $6.56B USD in net income for the quarter, higher than the analyst expectation of $5.72B USD, according to a survey by Thomson Reuters I/B/E/S.

Thus despite the Windows woes, it's important to remember that Microsoft is nearly twice profitable as Google Inc. (GOOG), a more vogue brand.  In other words, Microsoft's problems with perception are huge, but it still is very profitable and has solid revenue streams.

Source: Re/Code





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