Microsoft insider Natella ‘a safe choice’ to take helm, investors say - Omaha.com
Published Saturday, February 1, 2014 at 1:00 am / Updated at 10:53 am
Microsoft insider Natella ‘a safe choice’ to take helm, investors say

Elevating Satya Nadella to chief executive officer of Microsoft Corp. to replace Steve Ballmer would be met with mixed emotions, investors in the world’s biggest software maker said.

The 46-year-old native of Hyderabad, India, is a cloud computing whiz with the potential to reverse Microsoft’s image as a company stranded in the past, said Chad Morganlander, a fund manager at Washington Crossing Advisors. At the same time, he spent two decades working for Ballmer and Bill Gates and shareholders may be disappointed no outside candidate was found, said Donald Selkin of National Securities Corp.

Microsoft’s board is preparing to make Nadella, the company’s enterprise and cloud chief, its CEO, and is discussing replacing Gates as chairman, according to people briefed on the process who asked not to be identified. Microsoft spokesman Frank Shaw declined to comment.

“It’s a safe choice,” said Kevin Walkush, a business analyst at Jensen Investment Management in Lake Oswego, Ore. The firm oversees $7.2 billion and has 6.7 million Microsoft shares. “There’s a large faction that wants a disruptive tech visionary to take over Microsoft, and that group will probably be disappointed. Another group of people think we need a person like Satya who knows the business because it’s so complex and needs someone that has the inside knowledge.”

Nadella, president of Microsoft’s server business, was picked after several candidates declined to be considered. Ericsson AB CEO Hans Vestberg said he plans to stay at the Stockholm-based electronics maker. Ford Motor Co. CEO Alan Mulally took himself out of the running earlier this month.

“Shares might get a relief rally simply on closure of the issue even if the outcome is less than ideal,” Todd Lowenstein, a Los Angeles-based fund manager at HighMark Capital Management Inc., which oversees about $17 billion including Microsoft shares, wrote in an email. “Shareholders were hoping for an outsider with a fresh perspective.”

For investors, Nadella’s challenge is to ignite shares that have been left behind by Google Inc. and Apple Inc. Microsoft has generated a total return of 74 percent since January 2004, compared with a 93 percent gain in the Standard & Poor’s 500 Index.

“That’s why the stock has sagged a little bit lately,” said Selkin, who helps manage $3 billion, including Microsoft, as chief market strategist at National Securities in New York. “He’s a company insider, and I guess people are worried it’s more of the same.”

Moving Gates from the chairmanship would lessen the skepticism about promoting from within, said Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, which oversees $63 billion including Microsoft shares.

“It will allow for this internal candidate to be viewed more favorably by the market that he won’t feel the heavy hand of one of the founders and the big shareholder and the previous CEO all collectively perched above him,” Luschini said. “Maybe that was part of the negotiation.”

Microsoft is in the middle of implementing a reorganization and is working to close the acquisition of Nokia Oyj’s handset unit. It introduced the new Xbox One game machine in the holiday quarter and boosted sales of Web-based software such as Azure and Office 365, even as its traditional programs continue to languish along with personal-computer shipments.

Rivals such as Apple have shifted the technology landscape away from Microsoft’s mainstay of personal computers to mobile devices. Ballmer, who said he would retire by August, last year revamped Microsoft’s organizational structure and agreed to buy the Nokia operations for $7.2 billion.

“There needs to be a clean break,” according to Pat Becker Jr., a fund manager at Becker Capital Management, who said that of all the internal candidates, Nadella makes the most sense. His firm, based in Portland, Ore., oversees about $2.8 billion and owns Microsoft shares.

“It wasn’t that Ballmer was bad,” Becker said. “He didn’t do anything wrong, financial results were good under his tenure. But I also think Microsoft is hindered by perception and the CEO and the chairman have to be somebody that people listen to in the tech world.”

Kelly: Started at a dining room table, Home Instead thriving at 20 with $1B in annual revenue
'Main street' concept is takes shape at Sterling Ridge
Earnings roundup: McDonald's profit slips as U.S. sales drop
State regulator tells 2 ride services eyeing Omaha, Lincoln to cease and desist
Proposed 5% hike in cab fares meets reluctant state transportation official
Google signs deal with MidAmerican Energy to power Bluffs data center
Supreme Court conflicted on Aereo’s streaming TV service
'Being frugal counts': Student pays for college with pennies
Spring corn planting still sputters in Nebraska, Iowa, other key states
Nebraska banking and finance director to retire
Verizon Wireless looking to fill 100 full-time jobs in Lincoln
In brief: AT&T to expand 1-gig Internet service to 25 metro areas
Saddle Creek Baker's store considers adding a gas station
Black Hills Energy, Arbor Day Foundation partner to offer free trees
A stormy start to 2014 for Werner Enterprises, but forecast is brighter
The Record: Building permits, April 22
The Record: Bankruptcies, April 22
Why high oil prices are good for airlines
After peeling off its print layer, the Onion thrives
New job training program serves foster youth
USDA rural business investment program launched
Ring Supplier plans ribbon-cutting ceremony today
Meet a mermaid at Chicken of the Sea stop in Omaha
Thriving Nebraska technology company says it's 'the nature of our society' to automate jobs
Why two hotshots ditched six-figure salaries for a life of less
Deadline Deal thumbnail
Tokyo Sushi
$5 for $10 or $10 for $20 toward All-You-Can-Eat Sushi Purchase
Buy Now
< >
SPOTLIGHT »
Inside Business
To submit an announcement for "Inside Business", click here. For questions call (402) 444-1371 or e-mail announcements@owh.com.
WORLD-HERALD ALERTS »
Want to get World-Herald stories sent directly to your home or work computer? Sign up for Omaha.com's News Alerts and you will receive e-mails with the day's top stories.
Can't find what you need? Click here for site map »