Microsoft's Gates steps down as chairman, new CEO named

Gates "will devote more time to the company" in his new role on the board as "founder and technology advisor," a company statement said.

Indian-born Nadella, 46, who becomes the third CEO at Microsoft, has been executive vice president of its Cloud and Enterprise group.

"During this time of transformation, there is no better person to lead Microsoft than Satya Nadella," said the 58-year-old Gates.

"Satya is a proven leader with hard-core engineering skills, business vision and the ability to bring people together. His vision for how technology will be used and experienced around the world is exactly what Microsoft needs as the company enters its next chapter of expanded product innovation and growth."

John Thompson, lead independent director, will assume the job of chairman at Microsoft, which has been losing ground in the tech world amid a shift away from the traditional PC to mobile devices.

Nadella, who takes over from the retiring Steve Ballmer, said, "Microsoft is one of those rare companies to have truly revolutionized the world through technology, and I couldn't be more honored to have been chosen to lead the company."

He added, "The opportunity ahead for Microsoft is vast, but to seize it, we must focus clearly, move faster and continue to transform. A big part of my job is to accelerate our ability to bring innovative products to our customers more quickly."

The shake-up at Microsoft drew positive responses from analysts.

"I think this is a terrific development for the company," said Greg Sterling at Opus Research.

"Nadella also seems to have encouraged the new Gates role, which will be good for the company too. Personally, Nadella is a more humble and understated figure than Ballmer, which will be good for the company's image. I also think Nadella brings a strong mix of business and technology expertise to the role."

Frank Gillett at Forrester Research said Nadella has shown "a willingness to shake things up, so that seems positive to us."

Gillett added that by using Gates as a key advisor, "he's reaching for Gates's experience in running the company but also in the successes in that era. But by having him in an informal role, it also says we are in a new era. All in all, it seems quite positive."

Roger Kay at Endpoint Technologies Associates said Nadella will need to articulate a vision for Microsoft, which under Ballmer was undergoing a transformation from software to "devices and services."

"Nadella has to come up with the vision," Kay said. "Gates's vision was appropriate for the 1970s and 1980s."

Kay said Nadella "admits that he is green in asking support from Gates but that's OK. I think people can come into a job green and grow into it."

Nadella "has been the enterprise guy, so I would expect him to go in that direction. They may even spin off the consumer business."

Deutsche Bank analyst Karl Keirstead said Nadella was a "good choice."

"Although Microsoft is a big ship to turn, in our view Nadella will push to make Microsoft more innovative and agile, more like Apple and less like IBM," Keirstead said in a research note.

Nadella heads the team that runs the public, private and service provider clouds for Microsoft. Previously, Nadella was president of Microsoft's $19 billion server and tools business.

He is a native of Hyderabad, India and earned degrees from Mangalore University, the University of Wisconsin in Milwaukee and the University of Chicago.