Satya Nadella a Victim of His Own Success, May Not Be Named CEO

elopballmernadella

Time for an update on the never-ending Microsoft CEO rumor-mill; as I am still traveling abroad this will (hopefully) be a short post.  Sources I have talked to tell me the board is split between Stephen Elop and Satya Nadella.  As far as I’m aware, the rumors of dark horse candidate Ericsson CEO Hans Vestberg were pretty much total bullshit by Bloomberg.  Kevin Johnson will be a back-up in case something goes wrong, more on this in another post.  I have also heard that Tony Bates is not being seriously considered due to his inexperience, but Microsoft did want to hear his vision (for the company) and ensure that he stayed at the company because of his favorability & connections in Silicon Valley.  Nadella was favored very early in the CEO search among internal candidates, but the issue of who replaces him in his current position has become a sticking issue. 

Nadella is currently Executive Vice President of Microsoft’s Cloud and Enterprise group.  He essentially a mini-CEO in his own right and oversees more than many CEOs of smaller corporations.  The enterprise group is one of the most profitable, successful, and stable groups at Microsoft.  On the other hand, other divisions in Microsoft are currently struggling including Windows, Bing, etc.  Windows Azure has been a massive success at Microsoft and Nadella is partially responsible for this.

This part of a conversation I had with an individual trying to understand the board’s predicament:

 [Suril] what you need to understand is that a CEO can be fired/asked to resign for any reason. A blip on the resume, an accounting error that the CEO is not even connected with.  The CEO is ultimately responsible for ANYTHING that happens in the company along with his personal image.  

[..]

Look at CEOs that are not founders of the company, they rarely last even 10 years.  It is part of the reason they get paid so much. [..] On the other hand a regular employee may work a company for 25 even 30 years.

[…]

Nadella runs the most stable and profitable part of the company.  You want to hang onto him in case other parts of the company start to fail dramatically.  New CEO may be in and out the company within a year. 

The board apparently did have a conversation with Nadella about his possible replacement but were not pleased with the answers given.  Visual Studio head S. Somasegar, Scott Guthrie, and Mark Russinovich were apparently floated as possibilities but not to the liking of Jack Thompson.    Thompson apparently wants a search as comprehensive as the current CEO search if Nadella were to be replaced.  Thompson wants outside candidates to be considered at a minimum.  Apparently on potential candidate for CEO was asked if they would consider the Cloud EVP position, but responded with resounding no.

I have also heard Nadella’s lack of consumer experience has hurt him a little.  If you look at his work experience (below) it is mostly on the backend side of business/enterprise solutions.  Microsoft believes in the consumerization of IT, so a more consumer focused CEO would be consistent with that message.  Ultimately Nadella appears to be a victim of his success he is simply too valuable at this turbulent time in the company to be taken away from as the EVP of Cloud and Enterprise.  I think this leaves Stephen Elop as the most likely individual to become Microsoft’s next CEO.  The board, especially Jack Thompson has really liked Elop’s ability to make tough decisions and they believe picking him would go over well with Wall Street.   However, if a suitable replacement for Nadella’s current position can be found that sits well with the board he could still be named CEO.

As for a timeline of when the new CEO will be announced I’m hearing it will be after Mobile World Congress and much closer to spring.  Question becomes do you name the new CEO before or after the Build conference.  If you want to name it before the conference, how much before so it is not a distraction during the conference.  I previously reported that Terry Myerson has formally asked the board to consider naming the new CEO after the conclusion of the conference.

************

 Just as a quick refresher, let’s look take a brief look at Nadella’s history at Microsoft:

  • Earned a Bachelor’s degree in Electrical Engineering from Mangalore University,
  • Master’s degree in Computer Science from the University of Wisconsin, Milwaukee
  • Master’s degree in Business Administration from the University of Chicago (later in life)
  • Program Manager in Windows Developer Relations group in 1992
  • Afterwards spent time advanced technology incubation efforts inside Microsoft, including interactive television (ITV) and digital rights management (DRM)
    • ITV efforts largely failed at Microsoft during this time
  • Sun Microsystems 1990 – 1991
  • Joined Microsoft in 1992
  • 1999 Satya Nadella, Microsoft’s general manager for commerce platforms
    • Was a Gates favorite as early as 1999
  • Vice President of bCentral in 2001
  • Vice President of Business Solutions 2002 – early 2007
    • Business Solutions created from combining bCentral, Great Plains, and Navison a/s
    • Tami Reller acquired through Great Plains
  • Senior vice president of R&D for the Online Services Division 2007
    • In charge of Unified Search and Ad Platform (included LiveSearch & AdCenter)
    • Reports to Kevin Johnson
  • President of Server and Tools Business Feb 9 2011 after Bob Muglia ousted
    • Was picked by Ballmer after Bob Muglia was fired in Jan 2011
  • Currently Executive Vice President of Cloud and Enterprise

 

Just as an aside, if you were to look at an organization chart within Microsoft 2007 you would see Kevin Johnson at the as President of the Platform & Services Division having 5 direct reports including Satya Nadella, Steven Sinofsky, Steve Berkowitz, Blake Irving, and Chris Jones.   On the other side Jeff Raikes was in charge of the Microsoft Business Division and by this time Bob Muglia was VP of Server and Tools and being in charge of .NET services for some time.

(I’m currently on a limited internet connection, so a lot of this is from memory, please comment and correct me if I have any incorrect information)

Kevin Johnson would step down from Microsoft after the botched Yahoo takeover in 2008 to become CEO of Juniper; he would step down from Juniper in Jan 2014.  Steve Berkowitz would also leave Microsoft in 2008; now CEO of Move, Inc.  Black Irving left Microsoft in late 2007, now CEO of GoDaddy.  Jeff Raikes would step down in 2008 went on to become CEO of the Bill & Melinda Gates foundation.  Bob Muglia would remain at Microsoft until 2011 until he was fired by Ballmer for refusing to take a demotion.  Muglia would go to work for Juniper under Kevin Johnson until he abruptly left in Dec 2013.  Jim Allchin, in charge of Windows Vista, also left Microsoft in early 2007.  Doug Burgum, former CEO of Great Plains software, would leave Microsoft in 2006, now a philanthropist. 

This mass exodus of executives from Microsoft between 2006 – 2008 really allowed Satya Nadella and Steven Sinofsky to get into real positions of power.  Of course as we all know Stephen Elop was personally recruited by Ballmer to replace Jeff Raikes. 

In 2007 Nadella became VP of the Online Services division and was essentially running Live Search.  After the botched takeover attempt of Yahoo, Nadella was critical in forming the search alliance with Yahoo and convincing Qi Lu and Sean Suchter to come to Microsoft over from Yahoo. Qi Lu now runs Bing, Suchter would leave Microsoft in 2012.  Nadella would oversee the smooth transition in taking over Yahoo’s search responsibilities.  This gained Satya some favorability with Ballmer.  Nadella was also among the few people liked by Gates that remained at Microsoft.  When Ballmer fired Muglia, Gates influenced Ballmer’s decision to pick Nadella as a replacement.  Amitabh Srivastava ended up leaving Microsoft when Nadella was picked over him for Muglia’s replacement; I believe he ended up at EMC.  Since 2011 Nadella has really excelled at overseeing Windows Azure and is credited with leading transition to the cloud at a rapid pace.   

The real question remains is why would anyone want to become the CEO of Microsoft.  It’s certainly a nightmare in terms of responsibility and stress.  If we look at many of the executives that left between 2006 – 2008 they went on to be highly successful, many CEOs of smaller companies, but making more money than they would have at Microsoft.  The other issue is of course there are so few people qualified for the position and have the range of unique experiences needed to become Microsoft’s next CEO.  I have always been sympathetic towards Ballmer being Microsoft’s CEO.  And I think the difficulty in the CEO search has shown that Ballmer was a decent CEO who loved Microsoft, probably only second to Gates.  Will the new CEO have as much passion for the company, probably not.

While a fun rumor I do not think John Thompson will not name himself as CEO.  First Thompson is way too old at 64.  He also seems to have political ambitions and may not want to do other things in his remaining years. Thompson is an interesting guy, and maybe we’ll do a write up on him in the future.  I have also heard Microsoft is concerned about any criticism that will come over not picking a female CEO, more on this later.

Anyways no need to believe what I say, instead take this alternative view by Kara Swisher on her new website Re/code, which tells us Satya Nadella will be named CEO as early as Monday:

http://recode.net/2014/01/30/now-at-160-days-microsoft-ceo-search-could-be-nearing-its-end-with-insiders-on-inside-track-but-will-an-outsider-still-emerge/

About the author  ⁄ Suril Amin

Suril is a scientist, journalist and obsessive Microsoft observer. He holds an advanced degree in Biotechnology with minors in Biochemistry, Microbiology, and Molecular Biology. Send him tips on twitter: http://www.twitter.com/surilamin

  • Bugbog

    Interesting take.

    The BBC has also jumped, reporting that Satya Nadella is the favourite front-runner. (Not that they would necessarily have a clue, as they are constantly trying to sniff Sky New’s butt; and we all know how much Sky loves to promote Apple products, as if iDevices were their deity!)

    But I digress. Elop or Satya will do fine, though as you stated Elop does edge out Satya in consumer focused experience.

  • jaylyric

    Word on the street was that Elop might sell Xbox. I believe also Bing and maybe Windows Phone. Whoever the new CEO is needs not to kill off WP,W8,Xbox or Bing. They just need to find a way to successfully blend them and make them hugely successful,popular and profitable. Someone can do it. It’s already headed in that direction. Xbox has been and remains popular with the rest making great progress. I love them all personally.

    • Nfnc1234

      “Word on the street” is equivalent to “bullshit” in this case. Only this bullshit comes from Bloomberg, it’s still bullshit. Obviously someone from Microsoft (Bloomberg’s sources) trying to spread hate to Elop. Use a bit of reasoning, I am an amateur “full time” Microsoft watcher since many years ago, I haven’t seen/heard anything Elop say or do that remotely suggests he would kill anyone or anything. If he does, he probably only say it with his wife, not anyone else in the world, how would those Bloomberg’s sources know anything about it?

      • jaylyric

        True.. And I sure hope he or no one else will. I have a lot invested with that ecosystem lol.. I just want to see them all succeed. Tired of this Android and IOS two horse race bullshit..

        • Orc

          Elop said that the big problem for Nokia, were that it lacked an ecosystem. He knows the importance of an ecosystem.

          • Tirinti

            He knows how to design hipster gadgets and hipsters buys only Apple products.

        • blakjedi

          MS is much more than phones and mobile… they have to get EVERYTHING right simultaneously… desktop (not elop), (server) not elop, (windows) (not elop), (cloud) not elop, (IDE) (not elop), (xbox) (not elop) (search) not elop… Elop is the right person for the Phone division at most… nothing else.. Cloud is what brings everything MS is together…

  • donzebe

    Does Nadella really want to be CEO? is he that kind of guy? He seem like he like what he does now, like to talk business and will not want to change now.
    Does Elop wants to be CEO? is he that kind of guy? He seem like the type of guy who will want to be in 10 places at the same time talking business and being a sale man at the same time.
    What ever the choice, The feature of My windows phone and Xbox should be consider so seriously.

  • Nfnc1234

    Only thing I am wondering is: what is Microsoft waiting for? The Chinese government? That’s stupid, what take the Chinese so long?

  • Bryan

    Well this is a pretty bold post Suril, I’m going to give you the benefit of the doubt because you were right about Alan Mulally not becoming CEO and you correctly posted last year about the CEO not being named until this year. I used to love Bloomberg, sad to see they’ve been wrong about so much lately.

    • Nfnc1234

      Suril is certainly far more creditable than those people. Honestly those people have no clue what they are talking about. If someone says tomorrow is the end of world, they will report it like it real. Many respectable people, like Mary Jo Foley, said it sounding like Mulally was the number 1 choice. That’s just un-logical. I would say, Mulally was never under consideration. Its was just made up story.
      It’s frustrating to see so many people so stupid while they are supposed to be smarter than us to be a news reporter.

  • acrodex

    I think you gave too much credit to Nadella. Live search under him was not a success at all, until Qi came in.

    • beauzero

      Guthrie and Cloud too. Tells me Nadella is the right guy because he can pick the people who are needed to execute.

      • acrodex

        Qi was hired by Ballmer, not by Nadella. Actually, Nadella reported to Qi.

  • Rikikrik

    This just got in, fresh from Bloomberg, namely that Bouhner is in the race to become Ceo of Microsoft.

  • neva

    “I have also heard Microsoft is concerned about any criticism that will come over not picking a female CEO”
    Female CEOs have worked so well recently! /s
    It’s not like male CEOs never screw up but when women take charge in a technology company (at least recently) they tend to make big mistakes. Look at Marissa Mayer pissing of all her workers or Carly Fiorina.
    I’m not against women and I believe they are as capable has men to do about anything but I haven’t yet seen one doing a better job has a CEO of a tech company than men just like I haven’t seen a man doing a better job being a CEO than a woman in cosmetic companies. Hope this feminism crap doesn’t work with Microsoft.

    • SategB

      “Haven’t seen a man do as well as a woman in a cosmetic company” indicates a sexiest predisposition in your perspective, not mention ignorance in knowledge.

      9 of the top 10 cosmetic companies have a man sitting in the CEO seat. The person who is credited for creating the modern cosmetic industry is a man”.

      Fact if Ballmer was a women he would have been canned 6 years ago, bad management has no sex.

  • Tirinti

    If Elop will be CEO, Microsoft will bancrupt in few years.
    After he destroyed Nokia, he should never be more then janitor.

    • Danny

      Elop the idiot will sell Microsoft to Google. Windows and office burning platforms ….abandon ship abandon ship

  • tomakali

    Stephen Elop being a CEO of Microsoft will be good for Nokia too… He is a challenge winner unlike blackberry…