As part of the move, co-founder Bill Gates may step aside as
chairman but remain on the board, while lead independent director
John Thompson will take on the chairman role, the source said on
condition of anonymity because the process is private.
Bloomberg first reported the news on Thursday.
Nadella, a native of Hyderabad, India — where Microsoft has its
largest non-U.S. research center — was promoted to run the company's
fast expanding cloud, or internet-based, computing initiatives in
July last year as part of current CEO Steve Ballmer's radical
re-organization of the company.
Nadella's appointment would make him the most powerful Indian-born
tech executive in the world and put him alongside PepsiCo Inc's
chief Indra Nooyi as the leader of a well-known, large-cap U.S.
Before his role in shaping Microsoft's cloud computing business,
Nadella was in charge of the company's growing server and tools
unit, following on from high-level roles in Microsoft's Office and
Bing search engine teams.
"He's a solid choice," offering continuity of strategy and proven
execution, said Sid Parakh, an analyst at fund firm McAdams Wright
Some investors had campaigned for an external CEO who might be more
likely to shake up the company and reward shareholders with greater
dividends and share buybacks, but Parakh said that did not mean
Nadella would necessarily be unpopular with Wall Street.
"Any new CEO is going to have to have the shareholders' say in mind.
But it's not certain that will translate into actions," said Parakh.
Sources had previously told Reuters that Microsoft was down to a
"handful" of candidates, including Nadella, executive vice president
of the cloud and enterprise group, and Tony Bates, executive vice
president of business development, plus at least one external
Bloomberg added the Nadella plans had not been finalized. Microsoft
declined to comment.
Microsoft shares rose 0.8 percent to $37.15 after hours, after
gaining slightly in regular Nasdaq trading.
There have been calls for months for Gates to step down from a group
of investors who believe the company's co-founder is a block to
radical change and investor-friendly moves at the technology giant.
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Some investors have urged Thompson to consider the CEO role himself,
sources told Reuters this week. One person close to the board told
Reuters on Thursday that Thompson was not in the frame to lead the
company, but did not rule out a senior executive role, such as
Microsoft's CEO search has taken longer than most expected when
Ballmer announced his plan last August to retire within a year.
In a blog post on the company's website in December, Thompson
emphasized the need for a CEO with "an ability to lead a highly
technical organization and work with top technical talent."
Thompson, who leads the four-member CEO search committee, said at
the time he expected the panel to reach a decision "in the early
part of 2014."
The appointment of a company veteran like Nadella, which follows a
months-long search and extended flirtation with outsiders such as
Ford Motor Co Chief Executive Alan Mulally, could disappoint some
investors who were hoping for a more radical transformation at the
"While many on the Street are now expecting Mr. Nadella to get the
CEO spot, we believe filling this position with a core Microsoft
insider will disappoint those hoping for a fresh strategic approach
(e.g. potential breakup of enterprise/consumer, Xbox spin off) an
outside executive could have brought to the table," FBR analyst
Daniel Ives said in a research note, adding that innovation and
fresh strategies were essential for the company.
"With that said, we believe Mr. Nadella's prior roles in the Online
Services Division, Business Division, and most recently as president
of the Server and Tools business position him as a strong internal
candidate with a broad set of knowledge around Microsoft's massive
product portfolio," Ives wrote.
(Reporting by Bill Rigby; editing by
Bernard Orr and Andrew Hay)
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