Microsoft’s A-List Wish List for CEO Post

Software giant's search to replace former CEO Steve Ballmer not proving easy

Microsoft CEO Search

The need to get a system upgrade right isn’t lost on a software giant like Microsoft, which is facing a similar challenge in its own executive suite.

The company is looking for CEO 3.0, but replacing Steve Ballmer is not proving easy. Sources familiar with the discussions say there’s little consensus in the early going as to what qualities a suitable job candidate should embody.

What began as an unenviably tough task for John Thompson, the Microsoft board member leading the search process, could very well end with the highly regarded executive being picked himself to succeed Ballmer. There’s also a remote possibility that another familiar face at Microsoft could be tapped: CEO 1.0 Bill Gates may be up for a second turn at the wheel, despite reports that some leading investors are calling for him to step down as chairman of the board of directors.

Thompson and Gates aren’t the only internal candidates, however. Outgoing Nokia CEO Stephen Elop is still on the list, now that he is rejoining Microsoft as part of the sale of Nokia’s mobile business to the tech giant. But complications like his impending divorce proceeding and alignment with Ballmer could impede his chances.

But Microsoft may end up looking well outside Redmond, Wash., for a successor with a distinguished record in an adjacent business to the traditional software world, since the company knows it must diversify to achieve meaningful growth. Ford Motor Co.’s Alan Mulally leads a list of CEO names that media reports claim are in the running for the top job.

But there are even more names being bandied about by the search committee, including NBCUniversal’s Steve Burke, Verizon’s Lowell McAdam, General Electric’s Jeff Immelt, Juniper Networks’ Kevin Johnson and Microsoft’s former Windows chief, Steven Sinofsky. None of these execs is actually in talks for the CEO role at this early stage, but all could very well be fielding calls soon enough.

The man on the other end of the phone could be Thompson, though he himself may have earned the nod by getting high marks internally for his steadying hand on a process that by all accounts is proving problematic.

At 64, Thompson is above the expected age range for a role that would presumably require at least a five-year time horizon. But he has all the right credentials, having spent 10 years as CEO at data-protection firm Symantec Corp. and 25 years at IBM, among other roles.

Then there’s the potential return of Gates, the Microsoft founder and chairman whose 4.5% stake makes him the company’s largest individual shareholder. Though it’s highly unlikely he’d leave his philanthropic efforts behind, Gates is said to be considering the idea of putting his hat in the ring. However, Reuters reported last week that several leading investors are actually seeking he relinquish the chairmanship in a bid to bring an entirely new leadership team to the company.

The return of Gates would mark just the latest example of a founder reclaiming the lead role at the tech company he put on the map, with Google’s Sergey Brin and Yahoo’s Jerry Yang two other pioneers who made similar career moves.

Execs like Thompson and Gates have the advantage of being intimately familiar with the challenges Microsoft is facing. But most observers believe Microsoft is better off finding a fresh face for the company to help it achieve the next stage of growth.

Mulally is a turnaround king, credited with building up Boeing to outsell rival Airbus in the 2000s. At Ford, he overhauled the automaker to make it profitable again, even during the recession, without the need for bailout funding from the government. Microsoft needs a Mulally, whose talent is taking a big-picture look at a company’s seemingly disparate divisions and finding the common connection among all of them.

He’s also tech-friendly, believing mobile devices should seamlessly connect with cars through MyFord Touch, and apps through SYNC, Bluetooth and Wi-Fi connectivity. Ford is now developing connected car technology where a vehicle learns an owner’s driving habits, routes and music preferences. Mulally is also available, with Ford’s board granting him the greenlight to step down before his contract expires in 2014.

Burke has the advantage of some close ties to Microsoft; he sits on the board at Berkshire Hathaway, whose own CEO, Warren Buffett, is a Gates’ pal. Microsoft already has familiarity with Burke through a $1 billion investment it made in Comcast in 2004.

Burke also benefits from being the anti-Ballmer: He’s less a passionate showman and more a coolly methodical exec with the operational mindset that can help Microsoft untangle itself. While it’s true that he’s overseeing an entertainment company, the aspect of most value to Microsoft is his experience running the cable side of the business at a time of explosive growth for Comcast.

While Burke would not seem headed for the exits, having just signed a five-year contract extension with Comcast, it’s worth considering his path to the top job there is blocked by virtue of not having the last name Roberts. Microsoft could be his best shot to take the top job at a company of this scale.

Verizon’s McAdam could provide the boost in sales that the Windows Phone needs to compete against the more dominant Android and Apple iOS. Windows Phone is not expected to reach double-digits in terms of global market share until 2017 (it’s now at 3%), according to research firm IDC, but the recent $7.2 billion acquisition of Nokia’s handset business (which accounts for 82% of Windows Phone shipments) could speed that up. So could having McAdam at the helm, who understands the wireless biz better than anyone else.

In Immelt, Microsoft would have someone befitting the global nature of the CEO role, taking into account how incredibly diversified GE is across the planet, from China to Saudi Arabia. He’s also someone who knows his way around a turnaround, having spent the past decade reorienting GE through new areas of focus including health care and transportation, while shedding noncore assets like NBCU. Microsoft needs someone to be unsentimental about what to retain from its past to help build it up for the future.

Both Sinofsky and Johnson are Microsoft alums, with Sinofsky having left his post amid reports of a power struggle with Ballmer, after steering the ship for core offerings Windows and Office a little more than a year ago. Regardless of whether he returns, the one-year non-compete clause in his contract expires in November, freeing him up to get back in the game somewhere else. Being seen as a Ballmer antagoniste can’t hurt Sinofsky, though his association with the products Microsoft needs to diversify beyond isn’t going to help, either.

Johnson is also a Windows veteran, though he jumped over to Juniper five years ago. Nevertheless, he already indicated to the company in July his intent to retire, which sets him up nicely to move back to his former employer.

When all of the potential candidates are taken into consideration, Microsoft’s CEO search can be split into two camps: a wish list of outsiders who exist far from the usual high-tech circles and insiders who have occupied leadership roles at the company. Sinofsky and Johnson are executives who essentially split the difference, having spent time both inside and outside Redmond.