NEW YORK (TheStreet) -- Microsoft (MSFT) won't imminently announce a board replacement to Steve Ballmer, according to a source familiar with the company's thinking. The company's board of directors, currently at 10-members excluding Ballmer, is effective and unlikely to be changed ahead of Microsoft's annual shareholder meeting this fall, that source said.
Ballmer resigned from Microsoft's board of directors on Tuesday to focus on teaching engagements, charitable work and his ownership of the Los Angeles Clippers, a NBA franchise he recently acquired for about $2 billion. The resignation of Ballmer from Microsoft's board caps a year of dramatic change for the software, hardware and IT services giant. In February, Ballmer relinquished his CEO role at Microsoft, paving the way for Satya Nadella to replace him.
At the time, John Thompson was also appointed independent chairman of the company's board of directors, paving the way for co-founder Bill Gates to take a more active role in the company day-to-day operations. Nadella and Gates will not take expanded roles on Microsoft's board as a result of Ballmer's retirement.
Because Microsoft appoints board directors on a rolling basis, and at a cadence of about one new director a year in recent history, the company currently has a fully functional board even without Ballmer. At the end of July, Microsoft appointed John Stanton, a deeply experienced telecom executive who cut his teeth in the wireless industry with Craig McCaw, to its board of directors. In March, Microsoft appointed G. Mason Morfit, an executive with hedge fund ValueAct Capital Management, to its board of directors.
ValueAct Capital and Microsoft declined to comment for this story.
TheStreet's source said that Stanton, who lives in the greater Redmond, Wash.-area, will bring important skills in the telecom and wireless market to Microsoft's board of directors, potentially closing some skill gaps. In 2014, Microsoft closed its acquisition of Nokia's handset division, and CEO Nadella has been working to integrate the company's smartphone and tablet hardware with its wider software, data analytics and cloud computing offerings.
Morfit of ValueAct has received strong support from CEO Nadella since being appointed, however, the source said it is unlikely that ValueAct will have any further board representation. ValueAct is one of Microsoft's largest hedge fund investors and the firm's investment came just ahead of dramatic change at the company.
CEO Nadella is pushing a mobile-first, cloud-first strategy that seeks to increasingly weave together Microsoft's most powerful products such as Office 365 and Azure. Hardware such as the Microsoft Surface tablet and the Windows Phone will be built to leverage the company's best software, analytic and cloud services, Nadella has said.
In a recent memo, Nadella also told employees at Microsoft to expect change to the company's culture. "Nothing is off the table in how we think about shifting our culture," Nadella said, citing evolving job responsibilities, new partnerships and the hiring of new employees.
Recently Microsoft appointed Peggy Johnson, a longtime Qualcomm (QCOM) executive, to be executive vice president of global business development. Johnson will seek out new partnerships to underscore the strengths of Microsoft's services and product lines, TheStreet's source said. Deals such as a $400 million partnership with the National Football League stand as an example of the types of ties Johnson will look to build.
Ballmer's Exit Cemented
Tuesday's board resignation severs Steve Ballmer's direct ties with Microsoft after 34-years with the company and 14-years as CEO. Ballmer, who was the thirtieth employee of Microsoft and a long-time partner to co-founder Gates, is Microsoft's largest individual shareholder. He said on Tuesday he will hold onto those shares for the foreseeable future.
In his resignation letter, Ballmer reiterated his confidence that the company has positioned itself to remain a market leader as software and IT moves to mobile devices and onto wireless networks.
"First, Microsoft has been my life's work and I am proud of that and excited by what I see in front of the company and this leadership team. There are challenges ahead but the opportunities are even larger. No company in the world has the mix of software skills, cloud skills, and hardware skills we have assembled," Ballmer said in an email to Nadella on Tuesday.
Microsoft shares roughly tripled under Ballmer's leadership as CEO, as revenue and profits at the company skyrocketed. Ballmer's major point of struggle, however, was in the consumer market, where Microsoft struggled to successfully launch products.
"Under your leadership, we created an incredible foundation that we continue to build on - and Microsoft will thrive in the mobile-first, cloud-first world," Nadella said, in responding to Ballmer's email. "While your insights and leadership will be greatly missed as part of the board, I understand and support your decision," he added.
"[W]hile Mr. Ballmer expects to continue to be a large Microsoft shareholder for the foreseeable future, today's announcement marks the final chapter in the "Ballmer era" at Microsoft," FBR Capital Markets analyst Daniel Ives said in a Tuesday note.
"We continue to believe that the stage is set for improved top-line growth and profitability, with Nokia under Microsoft's hood and the restructuring plan underway, while Mr. Nadella looks to make sure he has the right people in the right places to deliver on this growth for the coming years," Ives added.
Microsoft shares have gained over 20% excluding dividends year-to-date.
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-- Written by Antoine Gara in New York