India-born Nadella in race for top job as Microsoft looks for a hero in slump

Microsoft Corp CEO Steve Ballmers retirement leaves the worlds largest software company in a succession crisis, amid the worst slump in the history of the personal-computer (PC) industry it helped create.

The search committee would consider internal and external candidates to replace Ballmer, 57, who would depart within the next 12 months, the company said in a statement on Friday. Besides India-born Satya Nadella, Tony Bates, Qi Lu and Terry Myerson are the leading choices among Microsofts executives, according to people with knowledge of the matter, who asked not to be named because the process wasnt public.

Ballmers planned departure follows a management revamp, the companys biggest earnings disappointment in a decade and a fifth straight quarterly drop in PC shipments. Meanwhile, Microsoft remains an outsider in a burgeoning mobile-computing market, led by Apple Inc and Google Inc.

It would be a difficult job, but if you could turn around Microsoft youd be seen as a hero, said Brendan Barnicle, an analyst at Pacific Crest Securities Llc in Portland, Oregon. He has the equivalent of a hold rating on the stock. Hes not really leaving the company in the best financial position.

At close on Friday, Microsoft shares rose 7.3 per cent their biggest single-day gain since April 2009 to $34.75 in New York. The stock has risen 30 per cent this year and is still trading below its price at the end of 2007.

Reducing units
Satya Nadella, who joined Microsoft in 1992 from Sun Microsystems and runs the companys cloud and enterprise business as its executive vice-president, is being seen as a frontrunner. According to media reports, he hails from Hyderabad and has a bachelors degree in electrical engineering from the Mangalore University and a masters degree in computer science from the University of Wisconsin.

Tony Bates, a former Cisco Systems Inc executive, joined Microsoft in the 2011 acquisition of Skype Technologies SA and now leads the companys business-development organisation.

Qi Lu came to Microsoft from Yahoo! Inc in 2008 and oversees the companys applications and services group, which develops products like Office, Office 365 and SharePoint.

Last month, Microsoft reduced the number of business units to four and gave Terry Myerson, the head of Windows Phone software, the added responsibility for the Windows and Xbox operating systems. Myerson has been at the company since it bought his start-up, Interse Corp, in 1997.

Outside options

Long term, they have a big problem, said Dan Niles, portfolio manager at Alphaone Capital Partners Llc in Tiburon, California. They are moving from a market where they have monopoly profits to a brutally competitive market of services and devices.

Frank Shaw, a spokesman for Microsoft, said the company wasnt making any executives available for comment.

If Microsoft decided to bring in a leader from outside, it might consider EBay Inc CEO John Donahoe or try to recruit Facebook Inc COO Sheryl Sandberg, Pacific Crests Barnicle said.

Theres not a clear internal successor, as some of the potential successors have left in recent years, said David Cearley, an analyst at Gartner Inc in Stamford, Connecticut. Itll be difficult for an outsider to come in and change a very strong culture that exists at Microsoft.

Steven Sinofsky, former head of the Windows division, had left the company last year after clashes with executives, including Ballmer, people familiar with the situation had said at the time.

Fresh blood
Microsofts board should look outside the company to replace Ballmer, said Bill George, a former CEO of Medtronic Inc and now a director at Exxon Mobil Corp and Goldman Sachs Group Inc.

They need fresh blood from outside, someone from the technology world who is innovative, creative and willing to take them in new directions, said George, whos also a management professor at Harvard Business School. Microsoft in recent years has missed mobile, search and all of social media, which is why I dont think they should choose from inside.