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Tough landscape shaped Microsoft’s CEO search

Microsoft has a mountain of cash, but was slow to react to Internet search and mobile. Above, its tablet computer.Elaine Thompson /Associated Press/File 2013

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

Tuesday’s hiring of Nadella as Microsoft’s chief executive after a five-month search is a safe move that probably will be greeted with relief at the company’s Redmond, Wash., headquarters, analysts say. But the methodical, almost predictable decision is likely to reinforce perceptions that Microsoft Corp. is a plodding company reluctant to take risks as it competes against younger rivals .


Google founder and CEO Larry Page boasts about taking ‘‘moon shots’’ and Zuckerberg promises to ‘‘move fast and break things,’’ but 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 in the past seven years. Meanwhile, 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 Inc. founder Steve Jobs would never have considered working at IBM Corp. 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,’’ said 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.’’

Still, Microsoft remains a moneymaking machine with an $84 billion cash pile. That alone should have been enough to tempt technological sharpshooters to take a shot at turning around the company, said Dennis Carrey, vice chairman of the executive recruiting firm Korn Ferry and coauthor 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 entirely possible. IBM famously bounced back during the 1990s after hiring an outsider, the former packaged food and financial services executive Louis Gerstner, who imposed the most wrenching changes in that company’s history.

Unsurprisingly, Microsoft called Nadella the best person to intensify its focus on blending software and gadgets with cloud computing — 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. He has spent the last 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 has a major handicap: He is a remnant of the same team that led Microsoft astray during previous CEO Steve Ballmer’s 14-year reign.

‘‘As Microsoft continues down the right lane of the highway at 55 mph with its new CEO in hand, the fear among many investors is that other tech vendors from social, enterprise, mobile, and the tablet segments continue to easily speed by the company in the left lane of innovation and growth,’’ FBR analyst Daniel Ives wrote.


Microsoft’s stock fell 13 cents to $36.35 Tuesday after Nadella was anointed as CEO. It fell another 53 cents Wednesday to $35.82. The stock fell 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 to hire an outsider as CEO, said longtime technology analyst Patrick Moorhead.

John Thompson, the Microsoft board member who oversaw the CEO search, made it clear the company did an exhaustive search. In a blog post late last year, Thompson disclosed that the board identified more than 100 prospects before whittling the field to about 20.

Thompson is now replacing Gates as Microsoft’s chairman. Gates remains on the board, 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.

The presence of Gates and Ballmer could have prompted any outside candidate to fear that new ideas might face resistance from an influential old guard, Metheny said.

Once Microsoft decided on the insider route, Nadella was an obvious choice, Carey said. ‘‘Only history will tell us whether it was the right choice.’’