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Microsoft's Gates steps down as chairman, new CEO named

05 February, 2014

WASHINGTON - Microsoft moved Tuesday to reboot for a mobile future, naming Indian-born Satya Nadella chief executive as founder Bill Gates shed his title of chairman for a more hands-on role.

Gates "will devote more time to the company" in his new role on the board as "founder and technology advisor," a company statement said. Nadella, 46, who becomes the third CEO at Microsoft, has been executive vice president of its Cloud and Enterprise group.

The moves come with Microsoft losing ground to rivals like Apple and Google amid a shift away from the traditional personal computer to mobile devices and cloud services. "As the industry changes we have to innovate and move forward," Gates said in a video released on the Microsoft website.

"I'm thrilled that Satya has asked me to step up. I'll have over a third of my time available to meet with product groups." The 58-year-old Gates said that "during this time of transformation, there is no better person to lead Microsoft than Satya Nadella." He called Nadella "a proven leader with hard-core engineering skills, business vision and the ability to bring people together."

Gates stepped down as CEO in 2000 and left day-to-day operations in 2008 to devote more time to his multibillion-dollar Bill and Melinda Gates Foundation. Microsoft said John Thompson, lead independent director, will assume the job of chairman at the tech giant. Nadella, who takes over from the retiring Steve Ballmer, said, "Microsoft is one of those rare companies to have truly revolutionized the world through technology, and I couldn't be more honored to have been chosen to lead the company."

He added, "The opportunity ahead for Microsoft is vast, but to seize it, we must focus clearly, move faster and continue to transform. A big part of my job is to accelerate our ability to bring innovative products to our customers more quickly." The shake-up at Microsoft drew positive responses from analysts. "I think this is a terrific development for the company," said Greg Sterling at Opus Research. "Nadella also seems to have encouraged the new Gates role, which will be good for the company too. Personally, Nadella is a more humble and understated figure than Ballmer, which will be good for the company's image. I also think Nadella brings a strong mix of business and technology expertise to the role."

Frank Gillett at Forrester Research said Nadella has shown "a willingness to shake things up, so that seems positive to us." Gillett added that by using Gates as a key advisor, "he's reaching for Gates's experience in running the company but also in the successes in that era. But by having him in an informal role, it also says we are in a new era. All in all, it seems quite positive." Roger Kay at Endpoint Technologies Associates said Nadella will need to articulate a vision for Microsoft, which under Ballmer was undergoing a transformation from software to "devices and services."

"Nadella has to come up with the vision," Kay said. "Gates's vision was appropriate for the 1970s and 1980s." Kay said Nadella "admits that he is green in asking support from Gates but that's OK. I think people can come into a job green and grow into it." Nadella "has been the enterprise guy, so I would expect him to go in that direction. They may even spin off the consumer business." Deutsche Bank analyst Karl Keirstead said Nadella was a "good choice."

"Although Microsoft is a big ship to turn, in our view Nadella will push to make Microsoft more innovative and agile, more like Apple and less like IBM," Keirstead said in a research note. Matthew Hedberg at RBC Capital Markets called Nadella "a safe choice" and said his background "could mean a bigger emphasis on cloud and enterprise than Microsoft has had in the past." Hedberg added that the shift in roles for Gates would be a "bigger positive for investor sentiment." In late morning trading, Microsoft shares were up 0.33 percent at $36.60. Nadella heads the team that runs the public, private and service provider clouds for Microsoft. Previously, Nadella was president of Microsoft's $19 billion server and tools business. He is a native of Hyderabad, India and earned degrees from Mangalore University, the University of Wisconsin in Milwaukee and the University of Chicago.

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