New Microsoft CEO Announcement Is Only Half — or One-Third — of the Story!

February 4, 2014 by Jon C. Ogg

Any time an iconic company like Microsoft Corp. (NASDAQ: MSFT) announces a new chief executive, it should be earth-shattering news. Two things are preventing that from being the case. Microsoft’s board of directors has appointed Satya Nadella as chief executive officer and as a member of the board of directors. Nadella previously held the position of executive vice president of Microsoft’s Cloud and Enterprise group.

The first thing keeping this news from being an earth-shattering event is that the replacement took forever to come about. Steve Ballmer announced, or was forced to, that he was stepping down months ago.

The second reason that Nadella is not the sole flash point is that Bill Gates is stepping down as chairman of Microsoft. The press release says he “steps up to new role as Technology Advisor” but you don’t drop a title like chairman and expect people to think this is stepping up.

Microsoft is naming John Thompson as chairman of its board of directors. Thompson is a well-seasoned technology CEO, formerly of Symantec.

Bill Gates said:

During this time of transformation, there is no better person to lead Microsoft than Satya Nadella. Satya is a proven leader with hard-core engineering skills, business vision and the ability to bring people together. 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 has been with Microsoft since 1992. He has been in charge of moving Microsoft to the cloud and headed up the development of one of the largest cloud infrastructures in the world. He also was in charge of Microsoft’s Server and Tools Business. Nadella was quoted saying:

Microsoft is one of those rare companies to have truly revolutionized the world through technology, and I couldn’t be more honored to have been chosen to lead the company. The opportunity ahead for Microsoft is vast, but to seize it, we must focus clearly, move faster and continue to transform. A big part of my job is to accelerate our ability to bring innovative products to our customers more quickly.

Again, the company is signaling that Bill Gates will devote more time to the company by supporting Nadella in shaping technology and product direction. That is conceivable for a short period, but by not being chairman and by saying publicly that the main focus will be on the Bill & Melinda Gates Foundation makes it hard to imagine it is a step up.

There is one more possibility to consider. Nadella seems to be the right man for the job, but it may take two years or more before this company really seems like a new company. Other internal candidates not selected as CEO may jump ship, just as we saw a decade ago when GE announced that Jeff Immelt was the one of three candidates selected as CEO. The ones skipped over may go run other companies.

Microsoft was up 0.9% to $36.80 on the news Tuesday, against a 52-week range of $27.10 to $38.98.