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Microsoft names Satya Nadella as next CEO

Posted: 05 Feb 2014     Print Version  Bookmark and Share

Keywords:Microsoft  data center  cloud  Open Compute Project 

Microsoft Corp. has announced Satya Nadella as Steve Ballmer's successor as CEO. The choice of Nadella, with his extensive experience as the company's head of cloud and enterprise division, would appear to reflect the moment in the industry and the place where Microsoft needs to be. News reports have suggested that the candidates have included Ford boss Alan Mulally, former HP boss Mark Hurd, Ericsson chief Hans Vestberg, and Stephen Elop, who left a top job at Microsoft to run Nokia.

Appointing Nadella "would be likely to go down well with Microsoft's rank and file, where he is seen as a popular and consensus-driven engineer," according to a Financial Times report.

Nadella was born in Hyderabad in 1967 and studied computer science at the University of Wisconsin. He spent time at Sun Microsystems before joining Microsoft 22 years ago. He ran Microsoft's consumer online services business, including its Bing search engine, before moving to the enterprise side.

He now runs the team behind the next-generation Cloud OS platform, which powers all of Microsoft's business cloud services. The company's cloud services division is said to have played a key role in its great fiscal Q2 (which ended in December). Revenue from cloud services rose 107 percent from a year earlier to $609 million.

Industry analysts are giving Nadella high praise for his work as the cloud chief, but there is some concern about how he would handle decisions on tablets, smartphones and other areas where he has no experience.

Peter N. Glaskowsky, a contributing analyst at Envisioneering Group, is among those with concerns. "Microsoft certainly believes that a strong position in data centers will help it gain a competitive advantage in its PC business," he stated. However, "putting a data center guy in charge of the whole company" might cause too much distraction, pulling him away from what he is good at in the first place.

Nathan Brookwood, principal at Insight 64, agreed with that assessment. He told us the biggest challenge any Microsoft CEO will face is its diversity. Its traditional cash cow has been PC clients, which played a huge role in enterprise software. But through Xbox, it is also in the gaming and entertainment market. "You need someone who could deal with such a diversified environment." Of course, Nadella has been at Microsoft for a long time, so "he could understand" the company's diversified business "better than an outsider."

Jim McGregor, founder and principal analyst at Tirias Research, said selecting Nadella would not bring significant change to Microsoft. Nadella has been a part of its management team, and the cloud services are something "already baked into" Microsoft's ongoing strategy.

By choosing Nadella, the company would be signaling to the world that the cloud will be "a major emphasis" for Microsoft's business, McGregor said. Windows will not be the cash cow it once was. "Growth value lies in services and content." Choosing Nadella would be "the wisest" move.

Though Microsoft has invested heavily in data centers and infrastructure to support cloud-based services, it is neither the first company to get into this market nor the most visible player there. "They are dwarfed by others."

Brookwood agreed with that. "Clearly, Microsoft is still a distant second or third player in web services. It's up against folks like Amazon who have a dominant share." In the search market, "Bing is clearly a second- or third-tier player versus Google and Yahoo... they have their work cut out for them."

Brookwood pointed out that Microsoft joined the Open Compute Project this week. The company "took the specs for the server platform they're using in their latest project and gave them to the community and saying, 'Anyone who wants to use this for data centers, be my guest.'" This shows "Microsoft's cloud side of thinking, which is different from Microsoft's client business."

McGregor said one move could change the landscape overnight. "If Microsoft offered Office 365 for free," it might open up a huge opportunity for Microsoft. "It might help keep Microsoft Office the effective standard as the productivity platform for both consumer side and enterprise side."

- Zewde Yeraswork
  EE Times

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