Microsoft names Satya Nadella as next CEO, Thompson as chairman

By Bill Rigby

SEATTLE (Reuters) - Microsoft Corp named 22-year company veteran Satya Nadella as its next chief executive officer on Tuesday, ending a protracted search for a new leader after Steve Ballmer announced his intention to retire in August.

Nadella called the appointment "humbling" in an email to the company's employees. He is only the third CEO in Microsoft's 39-year history, following co-founder Bill Gates and Ballmer.

Nadella, who led the creation of Microsoft's Internet-based, or "cloud," computing services, said in a videotaped statement that he would focus on "ruthlessly" removing any obstacles to innovation at the company.

Microsoft also said John Thompson, lead independent director, would succeed Gates as chairman. Gates will assume a new role as technology adviser and retain a seat on the board, the company said in a statement.

"Satya's asked me to step up, substantially increasing the time that I spend at the company," Gates said in a video statement. "I'll have over a third of my time available to meet with product groups. It'll be fun to define this next round of products, working together."

Shares of the world's largest software maker were up 0.6 percent at $36.70 in morning Nasdaq trading.

The Nadella appointment came after a search committee led by Thompson gave itself a year to find a new CEO, but the process took longer than most had expected. Sources said Ford Motor Co CEO Alan Mulally was a leading contender for many months until he recommitted himself to the automaker in early January.

Nadella also beat out various other candidates for the job. Several were close to the company, like Stephen Elop, who is set to rejoin Microsoft when its acquisition of Nokia's handset business closes, and Tony Bates, the former Skype boss now in charge of Microsoft's business development.

Investors and analysts are already weighing how effective Nadella will be in reigniting the company's mobile ambitions and satisfying Wall Street's hunger for cash.

Microsoft faces a slow erosion of its PC-centric Windows and Office franchises and needs somehow to challenge Apple Inc and Google Inc in the new realm of mobile computing. At the same time, some investors are campaigning for retrenchment and a bigger cut of the company's massive cash pile.

"While we view Mr. Nadella as "the safe pick" (vs. an outsider, Mr. Elop) as Microsoft continues down the right lane of the highway at 55 mph with its new CEO in hand, the fear among many investors is that other tech vendors from social, enterprise, mobile, and the tablet segments continue to easily speed by the company in the left lane of innovation and growth," FBR analyst Daniel Ives said in a research note.

Most agree that Nadella's background makes him a safe pair of hands to take the company forward, but there remains a question over his ability to make Microsoft a hit with consumers or with impatient shareholders.

(Additional reporting by Thyagaraju Adinarayan; Editing by Jeffrey Benkoe and Lisa Von Ahn)