Microsoft Gets Style Shift With Nadella Replacing Ballmer

Source: Microsoft
New Microsoft Corp. CEO Satya Nadella.

Right from the start, new Microsoft Corp. (MSFT) Chief Executive Officer Satya Nadella is showing that he will operate differently from predecessor Steve Ballmer.

On his first day leading the world’s largest software maker, Nadella, a 22-year Microsoft veteran who was yesterday named CEO, exuded an understated calm during a less than 20-minute webcast for customers and employees. Rather than the customary press conference, the 46-year-old used the event to introduce himself and take questions from Microsoft Vice President Susan Hauser. The first line in his memo to employees started with “today is a very humbling day for me.”

That contrasts with Ballmer, who for 14 years as Microsoft CEO was famous for his oversized personality. Ballmer, 57, once jumped out of a cake at Microsoft’s 25th anniversary party at Seattle’s Safeco Field and ran through the crowd giving high-fives as if he’d won the Super Bowl. In a memo to employees yesterday, Ballmer said he was “pumped.”

If jarring, the change in style will be one of the advantages of choosing Nadella as Microsoft’s third CEO, said David Yoffie, a professor at Harvard Business School. Ballmer’s aggressive salesmanship during the boom days of the personal-computer industry exemplified how Microsoft became the world’s most valuable company. Now the software maker needs a new approach as it plays catch-up in areas including tablets, smartphones and cloud services.

“Nadella’s obviously a deep technologist, and he’s going to bring that back to a Microsoft that hasn’t had it in the CEO office for years,” Yoffie said.

Changing Guard

Nadella’s low-key manner is also a sign of a changing of the guard in technology, as larger-than-life founders and near-founders such as Ballmer leave the scene. As part of yesterday’s changes, Microsoft co-founder Bill Gates also stepped aside as chairman and was replaced by lead independent director John Thompson.

Microsoft isn’t the only technology company that has hired a product-focused CEO in recent years. Yahoo! Inc. recruited engineer Marissa Mayer from Google Inc. in 2012 to be CEO, while networking-equipment maker Juniper Networks Inc. recently appointed Shaygan Kheradpir, who had built networks for Verizon Communications Inc. and others, as CEO.

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“This industry goes through cycles, and we’re in a cycle where customers are looking for new products,” Kheradpir said in an interview yesterday. “It’s not a sales or a marketing thing right now.”

Microsoft’s decision to forgo a press conference on Nadella’s ascension may also be an effort to show that “the business isn’t about one person or personality,” said Carol Blymire, a communications consultant. “Maybe we’ve come to the end of the era of the rock star technology CEO.”

Frank Shaw, a spokesman for Microsoft, declined to comment.

Employee Rally

At a rally with employees yesterday at the atrium in Studio D, one of the newer buildings at Microsoft’s corporate campus in Redmond, Washington, Nadella demonstrated some continuity with the Ballmer-Gates era. Amid a standing-room-only crowd, Nadella appeared with Gates and Ballmer, who have been Microsoft’s only other two CEOs. Nadella emphasized the importance of software and talked about how the company is moving into devices and cloud services, according to a person who attended.

Yet Nadella also delivered a message that it was time for a change. In his e-mail to employees, he wrote, “Our industry does not respect tradition -- it only respects innovation. Make no mistake, we are headed for greater places.”

Basketball, Cricket

The differences between Ballmer and Nadella begin with their backgrounds. Nadella is an engineer with degrees in electrical engineering and computer science, as well as an MBA that he earned by taking weekend classes after he had started at Microsoft. Ballmer is an Ivy League-educated businessman who specialized in sales and marketing.

The dissimilarities extend into the two men’s personal lives. Ballmer is known as a ferocious defender and rebounder on the basketball court. Nadella lists poetry as an interest and one of his favorite sports is cricket, which features scheduled tea breaks.

“He’s a thoughtful, quiet leader who rallies people around him,” former Microsoft Chief Financial Officer John Connors said of Nadella. “He works harder than anybody. He’ll make the tough calls but he’s very urbane and civil.”

Ballmer’s Changes

Ballmer has made some changes in the past year that will help Nadella, said Will Poole, a former Microsoft vice president who left in 2008 and remains in close touch with the company. Last year, Ballmer discontinued a review system he had implemented that ranked each person in every work group on a bell curve, an approach that forced some employees to behave more politically.

Ballmer also pushed through a major reorganization in July to break down walls at Microsoft. Rather than run their own discrete businesses, top executives now oversee functional areas, such as software and hardware engineering.

Ballmer’s strained relationship with Wall Street also leaves Nadella plenty of room for improvement, said Daniel Ives, an analyst with FBR Capital Markets.

“Ballmer wasn’t hands on with the Street,” said Ives, who has the equivalent of a hold rating on the stock. “I expect Nadella to be a lot more front and center, because it’s needed. He needs to prove that his vision is right.”

Nadella will still work with Ballmer in the boardroom, where both are directors. Having Ballmer there may make it complicated for Nadella to undo major initiatives from his predecessor, Yoffie said.

“Communicating with his board will be as challenging in some ways as all the other challenges he’ll face with the external world,” Yoffie said of Nadella.

To contact the reporters on this story: Peter Burrows in San Francisco at pburrows@bloomberg.net; Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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