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TheStreet Open House

Microsoft Appoints Nadella: What Wall Street's Saying

Stocks in this article: MSFT

NEW YORK (TheStreet) -- After weeks of rumor and speculation, Microsoft  (MSFT)cloud chief Satya Nadella has taken the company's reins from Steve Ballmer, who announced his retirement last year.

Nadella's promotion to CEO removes a big question mark about the company's leadership. The executive, who joined Microsoft from Sun Microsystems in 1992, is seen as a safe pair of hands with extensive knowledge of the tech giant and its operations.

Other names that were touted to replace Ballmer include former Apple (AAPL) iOS chief Scott Forstall, former Nokia (NOK) CEO Stephen Elop and current Microsoft executive and former head of Skype, Tony Bates.

Prior to becoming CEO, Nadella was executive vice president of Microsoft's Cloud and Enterprise Group and was president of the tech giant's Server and Tools business. He has also served as senior vice president of R&D for the company's Online Services Division and vice president of the Microsoft Business Division.

In his first email to employees as Microsoft CEO, Nadella paraphrased Irish writer Oscar Wilde: "We need to believe in the impossible and remove the improbable," he wrote.

Microsoft also announced on Tuesday that Bill Gates will step down as chairman of the company's board, to be replaced by John Thompson, lead independent director of the board. Gates, however, will remain on the board as a technology advisor.

Shares of Microsoft, which have gained more than 33% over the last 12 months, crept up 0.07% to $36.51 during morning trading.

Here's what Wall Street analysts are saying about his appointment:

RBC analyst Matthew Hedberg (Neutral):

"Mr. Nadella is a safe choice, he has served in a variety of roles since joining the company in 1992, most recently as the Executive Vice President of the Cloud and Enterprise group which could mean a bigger emphasis on cloud and enterprise than Microsoft has had in the past. The bigger positive for investor sentiment will likely be from Mr.Gates moving to his new role as Technical Advisor from Chairman, allowing for him to devote more time to supporting Mr. Nadella in product and technology decisions, and enabling Mr.Thompson, previously lead independent director of the board, to take over as Chairman of the Board. Mr. Thompson's previous experience was as the CEO of SYMC and brings experience in both enterprise and consumer sales. We are not anticipating any significant changes in strategy or a diversion from the strategy Microsoft has put into motion - Microsoft One. As such, we would not anticipate any divestitures such as Bing, Xbox, etc."



Evercore
analyst Kirk Materne (Overweight - $45):

"[We] see Nadella as best choice. In our view, the fact that Microsoft will again have a technologist as CEO is a plus and combined with Amy Hood, CFO, Microsoft now has one of the youngest executive teams among the mega-cap tech stocks. While this may not matter in the long-run, when it comes to changing the investor psychology around a stock that went sideways for almost 10 years, we think the fact that Microsoft will now have a younger executive team whose fortunes are more closely tied to the stock is important in terms of getting investors to take a fresh look at the story. We believe that Mrs. Hood is already doing a good job in terms of managing costs, providing more explicit guidance, (which reduces some of the downside 'tail risk'), and providing metrics that make Microsoft less opaque."

FBR Capital Markets analyst Daniel Ives (Market Perform):

"The main issue around Microsoft is its need for innovation and a set of fresh new strategies to drive the next leg of growth, in our view, as we continue to believe that the company faces tablet cannibalization, slower-than-expected Windows 8 adoption, and headwinds in its Windows/Office franchises given challenges in the PC market. With that said, we believe Mr. Nadella's prior roles in the Online Services Division, Business Division, Server and Tools, and most recently leading the Cloud and Enterprise segment, position him as a strong technical leader with a broad set of knowledge around Microsoft's massive product portfolio. Overall, we believe investors will breathe a sigh of relief that this high-profile CEO search has finally come to an end, with the focus now shifting to Mr. Nadella's strategic vision."

--Written by James Rogers in New York.

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