In TheStreet on August 27-- the day after Steve Ballmer announced he was retiring -- I suggested that Bill Gates was most likely to select Nadella. Why did I think this? Of all the people on the Microsoft board, Gates is undoubtedly the strongest. He's the founder. The rest of the board all pretends that they are meeting their fiduciary responsibilities by asking tough questions and providing strong oversight. But it's Bill's company and it is Bill's board.
This suggested to me that it had to be someone with whom Bill was comfortable. As the search process played out, we saw that even the outside contenders for the job -- like Alan Mulally -- have all had a personal tie to Gates.
The company is under tremendous pressure from outside observers to change. The forced removal of Steve Ballmer certainly was a sign that the board knew that it needed a change of direction. Even though a search for the next head of Microsoft would go far and wide, considering a vast number of candidates, I never believed that Gates would opt for a radical choice.
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Gates was never going to hand the keys to someone he perceived as a novice outsider who would rip apart the company indiscriminately -- all for the need to change. I'm not saying the company doesn't need some change. I'm just saying Gates was never going to go there. I also believe it was Gates' inherent conservatism that made younger candidates like Tony Bates unlikely choices.
Nadella stood at the top of the class of all the internal candidates. He built a monster of a cloud business for Microsoft. He successfully drove Server & Tools into a juggernaut multi-billion dollar business. That was a major business success in the areas which are Microsoft's future? Check. He was also a Microsoft lifer, liked and respected by Gates and every other engineer. That counted for a lot.
What's most surprising about the choice, though, is how much Wall Street seems to like it, at least based on the movement of the stock in the after-hours. If you'd asked me to predict ahead of time how Wall Street would react, I'd say they'd sell the shares, interpreting the hire as a sign that the company will stay together and not take the radical steps they'd like it to get. We'll see where the shares trade in the coming days.
Wall Street seems relieved for now that Microsoft's board has made a decision and is willing to start getting on with the business of installing the new leadership team.
At the time of publication Jackson had no positions in MSFT.