Microsoft Names Nadella CEO, Bill Gates Replaced as Chairman

Satya Nadella becomes third chief exec in tech giant's history, replacing retiring CEO Steve Ballmer; Gates to remain on board as adviser

Microsoft CEO Satya Nadella

Microsoft announced that veteran engineering exec Satya Nadella will be its next CEO, replacing retiring chief Steve Ballmer after a nearly six-month search, and that cofounder Bill Gates would step down as chairman of the board.

Gates is to remain a technology adviser to the company as John W. Thompson, who has been the lead independent director, will become chairman. Gates will remain on Microsoft’s board.

The 46-year-old Nadella, who joined Microsoft in 1992, most recently was executive VP of Microsoft’s Cloud and Enterprise group, which runs the network and server infrastructure to support Xbox, Bing, Office and other services. The Indian-born exec is only the third chief exec in the company’s 39-year history. Ballmer, who had been CEO since 2000, last August announced plans to retire. The Microsoft board considered numerous candidates — reportedly about 100 — both inside and outside the company before choosing Nadella.

[UPDATED: Microsoft shares climbed as high as 1.9% in early trading Tuesday on news of Nadella’s appointment, but fell back and closed down 0.4% for the day to $36.35 per share. The stock is up 5% over the closing price on Aug. 23, the day Microsoft announced Ballmer was stepping down.]

“During this time of transformation, there is no better person to lead Microsoft than Satya Nadella,” Bill Gates said in a statement. “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.”

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Execs whom Microsoft reportedly had considered for the CEO job included Ford Motor Co. chief Alan Mulally and Nokia CEO Stephen Elop, who rejoined Microsoft as part of the tech giant’s acquisition of Nokia’s mobile business last year. Nadella’s name emerged more recently in the process.

Nadella, in an email to employees released by Microsoft, said the company’s mission is “to ensure that Microsoft thrives in a mobile and cloud-first world.”

“Our industry does not respect tradition — it only respects innovation,” he wrote. “This is a critical time for the industry and for Microsoft. Make no mistake, we are headed for greater places — as technology evolves and we evolve with and ahead of it.”

Microsoft today is focused on a broader range of devices than the PC, he said — as well the company should, as sales of personal computers continues to decline. Microsoft’s $7.2 billion deal for Nokia deal is expected to close before the end of March. Nadella said “we will welcome to our family Nokia devices and services and the new mobile capabilities they bring us.”

Before heading Microsoft’s Cloud and Enterprise group, Nadella led R&D for the Online Services Division and was VP of the Microsoft Business Division. Prior to joining Microsoft, Nadella was a member of the technology staff at Sun Microsystems (which has since been acquired by Oracle).

Originally from Hyderabad, India, Nadella earned a bachelor’s degree in electrical engineering from Mangalore University. He received a master’s degree in computer science from the University of Wisconsin – Milwaukee and an MBA from the University of Chicago. He is married and has three children, and his hobbies include reading poetry and cricket, according to Microsoft.

Thompson, for his part, is CEO of Virtual Instruments and former CEO of Symantec. Microsoft named him to its board of directors in February 2012.