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Nadella to head Microsoft; Gates leaves chair role

| Tuesday, Feb. 4, 2014, 9:54 a.m.
Reuters
Satya Nadella (C), Microsoft's new CEO, addresses employees along with founder and technology advisor Bill Gates (L) and outgoing CEO Steve Ballmer on the company's campus in Redmond, Washington February 4, 2014. Microsoft Corp is betting a mix of old and young blood will revive the aging technology pioneer, but new Chief Executive Officer Satya Nadella may find it tough to push change with co-founder Bill Gates and former CEO Steve Ballmer breathing down his neck. The 46-year-old India native and former enterprise business chief takes on the monumental task of exploring new directions - but with Gates as his consigliere, and on a strategy that Ballmer orchestrated with the board. REUTERS/Microsoft/Handout via Reuters (UNITED STATES - Tags: BUSINESS SCIENCE TECHNOLOGY TPX IMAGES OF THE DAY) ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. FOR EDITORIAL USE ONLY. NOT FOR SALE FOR MARKETING OR ADVERTISING CAMPAIGNS. NO SALES. NO ARCHIVES. THIS PICTURE IS DISTRIBUTED EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS
AFP/Getty Images
This handout image provided by Microsoft on Tuesday, Feb. 4, 2014, shows the new CEO Satya Nadella. Microsoft said Tuesday that founder Bill Gates was stepping down as chairman to become a technology adviser to the tech giant as Satya Nadella was named chief executive officer.
AFP/Getty Images
This handout image provided by Microsoft on Tuesday, Feb. 4, 2014, shows new chairman John W. Thompson, formerly the lead independent director.

LOS ANGELES — Microsoft has named Satya Nadella, an executive in charge of the company's small but growing business of delivering software and services over the Internet, its new CEO. Company founder Bill Gates is leaving the chairman role for a new role as technology adviser.

The software company announced on Tuesday that Nadella will replace Steve Ballmer, who said in August that he would leave the company within 12 months. Nadella will become only the third leader in the software giant's 38-year history, after Gates and Ballmer. Board member John Thompson will serve as Microsoft's new chairman.

Nadella, 46, has worked at Micro­soft for 22 years. He has been an executive in some of the company's fastest-growing and most-profitable businesses, including its Office and server and tools business.

For the past seven months, he was the executive vice president who led Microsoft's cloud computing offerings. That's a new area for Microsoft, which has traditionally focused on software installed on personal computers rather than on remote servers connected to the Internet. Nadella's group has been growing strongly, although it remains a small part of Microsoft's business.

“Satya is a proven leader with hard-core engineering skills, business vision and the ability to bring people together,” Gates said in a 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.”

The company said that Gates, in his new role as founder and technology adviser, “will devote more time to the company, supporting Nadella in shaping technology and product direction.”

Gates will remain a member of Microsoft's board.

Analysts hope Nadella can maintain the company's momentum in the rapidly expanding field of cloud computing while minimizing the negative impact from Microsoft's unprofitable forays into consumer hardware. Major rivals in cloud computing include Google Inc., Amazon.com Inc., Salesforce.com Inc. and IBM Corp.

FBR Capital Markets analyst Daniel Ives said he views Nadella as a “safe pick.”

Ives said investors are worried that rivals “from social, enterprise, mobile and the tablet segments continue to easily speed by the company.” In a note to investors, he said the company's main need now is “innovation and a set of fresh new strategies to drive the next leg of growth.”

Microsoft shares fell 13 cents to close at $36.35.

Nadella's appointment comes at a time of turmoil for Microsoft.

Founded in April 1975 by Gates and Paul Allen, the company has always made software that powered computers made by others — first with its MS-DOS system, then with Windows and its Office productivity suite starting in the late 1980s. Microsoft's coffers swelled as more individuals and businesses bought personal computers.

But Microsoft has been late adapting to developments in the technology industry. It allowed Google to dominate in online search and advertising, and it watched as iPhones, iPads and Android devices grew to siphon sales from the company's strengths in personal computers. Its attempt to manufacture its own devices has been littered with problems, from its quickly aborted Kin line of phones to its still-unprofitable line of Surface tablets.

Analysts see hope in some of the businesses in which Nadella had a key role.

Microsoft's cloud computing offering, Azure, and its push to have consumers buy Office software as a $100-a-year Office 365 subscription are seen as the biggest drivers of Microsoft's growth in the next couple of years. Both businesses reported that the number of customers more than doubled in the last three months of the year, compared with a year earlier.

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