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):