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: