Microsoft new CEO Nadella: Good news, bad news and unknowns

Microsoft new CEO Nadella: Good news, bad news and unknowns

Summary: Going forward, the big question regarding the Satya Nadella CEO pick is whether the safe choice was really the best option---or the only option. Can Nadella really shake Microsoft from the inside?

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Microsoft has a new CEO in Satya Nadella and like any leadership transition there are a bevy of unknowns even when you consider the software giant's new leader was considered to be a safe internal pick.

nadella mug

Nadella was named CEO on Tuesday with Bill Gates taking more of a technology advisory role. It remains to be seen if Gates' product role is more about public relations or actual development. In any case, Nadella's first talk as CEO indicated that software is the core of the company and Microsoft isn't hardware happy (despite the Nokia purchase).

Going forward, the big question regarding the Nadella pick is whether the safe choice was really the best option---or the only option.

Here's a look at the good news, bad news and unknowns about Nadella as he starts his new gig.

More: Microsoft goes internal: Satya Nadella is CEO | Reading between the software lines of Nadella's first CEO speech | Meet Microsoft's new board chairman John Thompson | Steve Ballmer: The Exit Interview | Microsoft Nadella announcement | Nadella's email to the troops

Good news: Nadella will provide continuity. Nadella has been at Microsoft 22 years and knows the company's enterprise cash cows well. He also knows the cloud.

Bad news: He's an insider and you could argue that Microsoft needs more shaking up. Analysts considered Nadella a safe pick. Safe isn't always the best course.

Unknowns: Will Nadella shake things up? Credit Suisse analyst Philip Winslow said:

We believe that multiple nearer-term options exist for Nadella to unlock shareholder value at Microsoft, many of which we believe Steve Ballmer had not been willing to execute, including (1) rationalizing the cost structure of the company, (2) potentially divesting/exiting underperforming/noncore businesses, (3) optimizing the capital structure (e.g., raising debt against off-shore stockpiles of cash), (4) increasing the level of buybacks/dividends, and/or (5) accelerating the shift to Office 365 (i.e., "pull an Adobe").

An outsider would have the honeymoon period to make some of those moves. Nadella may not.

Good news: Gates is more involved and will devote more time to the company as a tech advisor.

Bad news: Gates is more involved and will devote more time to the company.

Unknowns: Will Gates be an asset or liability to Nadella? Is Gates washed up from a product perspective?

Good news: Nadella is an enterprise guy and that unit makes all the money.

Bad news: Nadella may have the consumer product mojo to really make the company's Nokia bet pay off.

Unknowns: Can anybody make Microsoft's Nokia bet pay off?

Good news: Nadella is a technologists trade.

Bad news: Technologists struggle with user experience and design.

Unknowns: Will Nadella be able to provide a seamless and attractive Microsoft experience across all platforms?

Good news: Nadella knows the cloud and has established Microsoft as a real player.

Bad news: He has a big challenge threading the innovator's dilemma when it comes to preserving Office revenue and accelerating a move to Office 365.

Unknowns: Does Nadella have the air cover to move to the cloud faster and take the financial hit as soon as possible.

Good news: Nadella said that Microsoft has to be a mobile and cloud first company.

Bad news: Microsoft still has a ways to go in mobile.

Unknowns: Does Microsoft's tandem of Windows Phone and Nokia work for any leader?

Good news: Nadella seems to recognize there's a post-PC era.

Bad news: Microsoft's Windows franchise is still attached to PCs.

Unknowns: Have PCs sales bottomed? Does Nadella have what it takes to milk the Windows business while innovating?

Topics: Steve Ballmer: The Exit Interview, Enterprise Software, Microsoft

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19 comments
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  • questions...

    ...For the soul
    ArcaneAce
    • And the microsoft toilet paper

      Changes it's wrapper..............
      Jahm Mittt
  • he

    Doesn't seem like to man for the job to me personally. Here's hoping for the best tho. And Nadella please bring a freakin wallpaper to windows fone and independent volume controls and other such customisations so people can acctually feel they have a bit of control over their fones
    ArcaneAce
    • He seems quite a resaonable and relaxed character, so far

      far more like Jobs than that idiot and boofhead Ballmer.

      And he likes cricket . . . and that has to be a plus.
      1,2,3
  • Character is necessary

    They come difficult times for the CEO, the internal necessary restructuring after the purchase of Nokia, thousands of layoff, Satya needs more character that humility to direct the company
    luis river
  • Analysts...

    It seems most analysts don't understand Microsoft, which is probably why an internal promotion to CEO is a good bet. MS is too complex for many outsiders to see what is going on.

    "Divest non-core businesses", they usually mean "Bing" here, but most analysts tend to think of Bing as "bing.com", whereas Bing is an integral component to many OS and enterprise products. If they got rid of Bing, they'd either cripple their products or they'd have to get busy developing Bing 2.0...

    As it is, the bing.com website is a loss-leading showcase.

    Likewise Xbox, it took years for MS to penetrate enough of the market to start seeing a return on investment and as soon as it starts making some of that money back, MS should get rid of it, instead of reaping the rewards? (And no, I'm not an Xbox fan, I've never owned one, in fact I only ever had a PS2, which I bought when I was ill between houses and my DVD player was in storage. It hardly got used.)

    MS made some mistakes over the last decade and that was the time when they could have been easily split up. Now that they are starting to pull together in what appears to be a common direction and integrating well, they should start asset stripping?

    I wish Satya Nadella the best and hope he can pull off the turnaround.
    wright_is
  • SHUT IT DOWN!!!!

    In the famous words of Gordon Ramsey - SHUT IT DOWN!!!!

    You'll be doing the world a favor. Sell off Office, Xbox. Donate Bing and Windows to the landfill and be a hero!
    itguy10
    • It would be better if they shut trolls down

      then we wouldn't have to listen to your usual jealousy filled drivel.
      William.Farrel
      • Shut down trolls? Great idea, but then, where would you go?

        .
        1,2,3
    • ....brave soul.....

      Head wound? .........or Genetic?....Thank you for your service....
      ChoMlo
  • Microsoft new CEO Nadella: Good news, bad news and unknowns

    Its all good news. Microsoft doesn't need shaking since they have been profitable for many years now. Satya Nedella will do just fine since he has been with the company for a while and knows their core values. With direction from Bill Gates and Steve Ballmer in is in an excellent position to help Microsoft stay as the #1 software company.
    Loverock.Davidson
    • If you don't think that parts of MS need a shake-up, then you live in

      a fairy land.

      Sure, many MS products are doing well, but mobile has been a continuing problem for MS and it includes a long list of failures. You could go back as far s Windows CE and then include Kin, Zune, Surface RT, the RT OS, possibly Surface Pro, Windows Phone and Nokia . . . . That is a long history of problems in the one area - mobile!
      1,2,3
      • I remember when Win 95 came out...

        And it was designed by dick heads....

        Search?

        Yeah it did - Microsoft Word, Publisher, Excel and *.txt files only....

        And for all of us that had Corel Draw, Word Perfect etc...

        Nooooooooooooooooooooooooooooooooo

        And I thought, "You people at Microsoft are pushing this monopoly bullshhit wayyyyyyyy too far" and so did a lot of other people.......

        We all got rather nasty about it and MS lifted their sleazy game in fright....

        But Bill and the rest of team sleaze have never ceased being arseholes and imbeciels - releasing their crappy bug infested software ever since.
        Jahm Mittt
  • I hope he ignores analysts

    I hope he ignores analysts like Credit Suisse's Philip Winslow who only care about thier bottom line and not Microsoft as a going concern. The whole Shareholder value thing is so overblown and has been/is ruining many companies.
    Skippy99
  • He will have to be a highly Intuitive Innovator if MS is to succeed

    Great innovations don't come that frequent according to history and especially the history of S&T. The problem with CEOs of our largest corporates is that they have not come up in the footsteps of global change-master inventors and innovators as they have gone into management and been brainwashed into management concepts that don't particularly work well. That happens to them all as their time is

    consumed in making big and bigger returns for shareholders year-on-year and innovation goes by the way. In this respect the big picture is too big for them to innovate and where they all get bogged down in the overall running of a conglomerate and have no time to think great innovative things. They even go wrong in surrounding themselves with insiders who have also been brainwashed in the ways of the company and they therefore do not innovate either. The word 'innovation' is easy to say but few understand what it is. Sounds good in meetings and interviews with a few other words like creativity thrown in for good measure, but these words never seem to go anywhere through the people who use them.

    For innovation to really revolutionise CEOs have to look elsewhere but they are so blind that they never realise that the greatest breakthroughs according to history come from outsiders but where CEOs do not comprehend this as they never undertake an in-depth research of who were the fundamental thinkers that created whole new global industries. These are not people like Gates either who saw a good thing, went for it and was lucky enough for it to be a success. Most founders of our great corporations evolved this way on the backs of other who actually invented the thing that kick-started the organization. Therefore what CEOs should do but they never do is to listen to and be advised by outsiders as they are according to history the ones who make the difference and the big leaps forward, not those from within who have already been programmed to operate in a certain way.

    My advice therefore for all these CEOs is to create an independent corporate offshoot that only allows outsiders to debate and consider new fundamental thinking and advise the corporates. This according to the history of S&T will create more global opportunities by far than the mundane inner sanctums of bog standard culture that has hardly any innovation blood within its veins. Think differently is my advice or things will just stay as they are or rapidly go into decline and typical of most corporate empires.

    Therefore if Nadella is to keep MS at the forefront he will certainly have to think out of the box, forget about MS's internal culture and believe that he is transforming, not doing more of the same that has gradually eroded MS's competitive advantage. Indeed all empires die according to history and the greatest enemy to them has always been 'complacency'. Another attribute he certainly will have to have is great intuition and according to debatably the greatest engineer of the 20th century that I knew, is the greatest asset that a revolutionary innovator can have. That engineer's uncle was Einstein's mentor - http://www.thewif.org.uk/home/christmas_2013.pdf


    It is hoped that the new broom understands this clearly.

    Dr David Hill
    Chief Executive
    World Innovation Foundation
    bettysenior
  • Analyzing monetization

    Surviving the analysts is difficult even for a company with the profitability and deep pockets of MSFT. The criticism is unrelenting the advise short term and shortsighted. Will MSFT survive the attack of the finance sector, the greed industry?
    primartcloud
  • Splitting Microsoft

    I suggest that Microsoft split into two different organization. Commercal/Enerprise and Consumer and employ 2 CEO for each organization. It will be very difficult to run one company serving two different segments.
    somchaiss
  • Give Nadellasome breathing room!

    Since none of the pundits on ZDNet or elsewhere have any experience or expertise in running a Fortune 500 technology corporation, Mr. Nadella should at least be given some time in his new position as CEO of Microsoft for those wise enough to determine whether he "maybe" on the right track.

    Fortunately he has one very critical characteristic going for him, that of having been formally trained and with considerable high level experience as a technologist, and with proven record of establishing Microsoft in the Cloud Computing Services arena, without too many failures. That feat alone is worth his positive evaluation. At least he starts out with significantly better credentials than Steve Ballmer, who had no clue about modern technology or where Microsoft should be positioned going forward. Acting always in retrospect, Ballmer in my humble opinion was generally ineffective as CEO.

    Give the guy some room!
    wanderson
  • Excel database functions

    I wish he would get his Excel programmers to fix Excel's database functions. Right now, they are the level of Lotus 1-2-3 V3.0. Make them so that you can place the criteria in the function itself instead of a criteria range somewhere else on the spreadsheet.
    cmcgath