February 05, 2014

Microsoft announced Tuesday that Satya Nadella, the company's enterprise and cloud chief, will succeed Steve Ballmer as CEO. Microsoft chairman Bill Gates will leave his role as chairman and assume a new role advising Nadella.

Gates and Ballmer, the only other CEOs in Microsoft's history, built the company from scratch into the largest and most dominant software company in the world. Even today, following weak reception to Windows 8, nine out of 10 computers run a version of Windows. But as Microsoft's third CEO, Nadella will face challenges.

Nadella has helped Microsoft develop its Azure cloud infrastructure into a formidable industry presence, with the company not only challenging Amazon for public and hybrid cloud customers, but also advancing services such as Bing, OneDrive, Skype, Xbox Live, and Office 365.

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Still, he'll inherit a company in the midst of a top-to-bottom reorg, and that's struggling to transition from the PC era to the mobile era. Nadella has never before faced challenges of such scale and complexity.

"A leadership transition is a delicate balance between continuity and disruption. The most important thing for the Microsoft board right now is to make sure that Satya Nadella is fully supported without being hamstrung," said Forrester analyst Ted Schadler in an email. "Bill Gates leaving and Steve Ballmer staying on as a board member would accomplish that."

In a statement, Microsoft said Gates will support Nadella "in shaping technology and product direction." John Thompson, the Microsoft board's senior independent director, will replace Gates as chairman.

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