Microsoft announces new CEO
Veteran executive Satya Nadella will take the reins after a gruelling five-month search.
SEATTLE - Microsoft has unveiled Satya Nadella as its new chief executive, following a gruelling five-month search for a replacement to Steve Ballmer who announced his retirement last year.
Already, investors and analysts are weighing how effective the 22-year veteran will be in reigniting the company's mobile ambitions and satisfying Wall Street's hunger for cash.
The world's biggest software firm faces a slow erosion of its PC-centric Windows and Office franchises and needs to somehow challenge Apple and Google in the new realm of mobile computing.
At the same time, some investors are campaigning for retrenchment and a bigger cut of the company's massive cash pile.
Most agree that Nadella's background in creating Microsoft's internet-based - or 'cloud' - computing services makes him a safe pair of hands to take the company forward, but there remains a question over his ability to make Microsoft a hit with consumers or with impatient shareholders.
"He is the right person to drive safe, right down the middle of the fairway, and continue Microsoft's strengths," said Rajeev Chand, managing director and head of research at tech investment bank Rutberg & Co.
"What we don't know is will Nadella help with the consumer revival, or with the mobile revival. Mobile is an open hole in his background."
Microsoft's problem is stark. More than 90 percent of PCs run Windows, but only four percent of smartphones do and an even smaller slice of tablets.
The company is still the undisputed king of workplace computing, but it is finding it hard to kindle the affections of consumers at home and on the move. Its Surface devices had some success over the holiday shopping season, but its phones are showing signs of losing momentum.
"I would advise him to take a fresh look at mobile, or bring in some talent who really understands the space," said David Smith, an analyst at tech research firm Gartner.
SHOW US THE MONEY
Aside from strategy quandaries, Nadella has to wrestle with the challenges of managing an enormous corporation and dealing directly with big investors, something he has had no real experience of as a unit head at Microsoft.
ValueAct Capital, which led a shareholder revolt last year that culminated in the retirement of Ballmer, has been pushing for the company to abandon its ambitions to be a consumer hardware maker, refocus on its strengths with business applications and return more of the rewards from those steady, high-margin businesses to shareholders.
"The fact is that with mature companies, shareholder value is more driven by capital allocation than by new products," said one Top 30 investor in Microsoft, who asked not be named as they were not authorized to speak publicly. "A repurchase would be great."
That effectively means refocusing on Office and Windows and distributing more of Microsoft's $84 billion in cash and short-term investments, although most of that is held overseas.
In September, Microsoft raised its dividend 22 percent and renewed its $40 billion share buyback program, but Wall Street is still hungry for more.
It is expected that co-founder Bill Gates will relinquish the chairman position, to advise Nadella on technology and allow another board member to take on the task of dealing with investor relations, an idea that has broadly been welcomed by investors.
"More of Bill Gates is a good thing for Microsoft," said Chand at Rutberg.