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Was Microsoft smart to play it safe with CEO pick?

By Michael Liedtke
Associated Press

After compiling a list of more than 100 CEO candidates, Microsoft settled on Satya Nadella, a homegrown leader who joined the software maker in the early 1990s. That’s back when Google’s founders were teenagers and Facebook CEO Mark Zuckerberg was in elementary school.

Tuesday’s hiring of Nadella as Microsoft’s CEO after a five-month search is a safe move that’s likely to be greeted with sighs of relief around the company’s Redmond, Wash., headquarters, industry analysts say. But the decision is likely to reinforce perceptions that Microsoft is a plodding company reluctant to take risks as it competes against younger rivals.

While Google founder and CEO Larry Page boasts about his company taking “moon shots” and Zuckerberg promises to “move fast and break things,” Microsoft has fallen behind the technological curve after underestimating the importance of Internet search more than a decade ago and reacting too slowly to the rise of mobile devices during the past seven years. Sales of personal computers running on Microsoft’s Windows software are shrinking.

Microsoft’s malaise may have narrowed the field of up-and-coming visionaries interested in running a company founded in 1975.

Just as Microsoft founder Bill Gates and Apple founder Steve Jobs would never have considered working at IBM in the 1980s, today’s entrepreneurial whiz kids scoff at Microsoft’s overtures.

“Going to work at Microsoft could make it look like you are going back to the dark ages,” says Richard Metheny, a management coach for the executive search firm Witt/Kieffer in Chicago. “It’s a well-entrenched business that has had trouble lately figuring out how to play in this new world.”

Despite its challenges, Microsoft remains a moneymaking machine that sits atop an $84 billion cash pile. That alone should have been enough to tempt executives to attempt to move the company forward, said Dennis Carrey, vice chairman of executive recruiting firm Korn Ferry and co-author of the book, Boards That Lead.

Microsoft “is like a car that still has a full tank of gas, but it’s just an old model,” Carrey said. “There are a lot of great tech executives who yearn for that kind of challenge, especially with a bucket of cash to make acquisitions and do some really fun, cool stuff.”

A Microsoft resurgence is possible. IBM bounced back during the 1990s after hiring an outsider, former packaged food and financial services executive Louis Gerstner, to impose the most wrenching changes in that company’s history.

Microsoft described Nadella as the best person to intensify the company’s focus on blending software and gadgets with cloud computing — a term broadly used to describe the concept of delivering applications and other services over the Internet.

Nadella, 46, wins praise from analysts and colleagues for his technical expertise, affability and deep knowledge of Microsoft’s culture and disparate divisions. He has spent 22 years at the company, working in jobs that gave him insight into cloud computing, data centers, Internet search and video game consoles.

But Nadella is a remnant of the same management team that led Microsoft during previous CEO Steve Ballmer’s 14-year reign.

Microsoft stock fell by more than 30 percent during the Ballmer era.

Given the stock’s poor performance and the challenges facing the company, it probably would have made more sense for Microsoft’s board to hire an outsider as CEO, says longtime technology analyst Patrick Moorhead.

Although he is relinquishing the chairman’s role, Gates will remain on Microsoft’s board along with Ballmer. The two men collectively own a roughly 8.5 percent stake in Microsoft, investments that could be used to amplify their voices even more.

Microsoft could have stolen a page from Yahoo’s playbook when it raided rival Google to hire Marissa Mayer as its CEO in 2012. That decision has mostly worked out for Yahoo, though the company still hasn’t been able to boost its revenue under Mayer.



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