Microsoft Veteran Tapped for Key Unit

Source:  WSJ.com

By STEVEN D. JONES

 

Nadella, a Top Engineer in Online-Services Unit, Will Succeed Muglia as Leader of Business Focused on Cloud Computing

Microsoft Corp. tapped a company veteran to lead its big server and tools business, highlighting the technology giant's confidence in the strength of its executive bench, even as it reshuffles its senior ranks.
Satya Nadella, a 19-year Microsoft veteran, will lead the company's $15 billion-a-year unit focused on cloud computing. He succeeds longtime executive Bob Muglia, who said in January that he will leave the company this summer.

Bloomberg News

Satya Nadella, tapped to lead Microsoft's server and tools unit, is pictured at a Microsoft event in December.   In a statement Wednesday, Microsoft said Mr. Muglia will work with Mr. Nadella, a top engineer in the company's online-services business, as Mr. Nadella makes the transition to his new role.

Mr. Nadella's elevation comes after a year in which many long-serving executives left the company, which is based in Redmond, Wash. Those executives included chief software architect Ray Ozzie, business-division president Stephen Elop and entertainment and devices division president Robbie Bach.

In 2009, then-Chief Financial Officer Chris Liddell departed, later re-emerging as finance chief at the restructured General Motors Co. Analysts said the decision to replace Mr. Muglia with an internal candidate underscores Chief Executive Steve Ballmer's confidence in both his team and strategy. In January, Mr. Ballmer told company employees that he had decided the server and tools unit, whose products range from database software to the Windows operating system for servers, needed new leadership.

James Ragan, an analyst at investment bank Crowell Weedon in Los Angeles, said the company has been successful in replacing business heads in the past. He pointed to the reorganization of the entertainment division that paid off with a strong reception for Microsoft's new Kinect motion-sensor game accessory.
"There is a lot of press about the point person in these business units," Mr. Ragan said. "But they have a capable staff in each business."

Crowell Weedon has a buy rating on Microsoft shares.

The server and tools unit is Microsoft's third-largest by revenue, behind its business and Windows and Windows Live divisions. In January, the unit reported that fiscal second-quarter earnings jumped 21% on a 10% increase in revenue.

Most recently, Mr. Nadella led engineering efforts in Microsoft's online-services division, which the company said "includes overseeing the technical strategy for one of the largest cloud infrastructures in the world, spanning the company's search, portal and advertising platforms."

So-called cloud technology, which enables individuals and companies to access computer servers over the Internet or internal networks, has taken on growing importance to many tech companies.

Microsoft is using cloud computing for many of its internal functions already.

Separately Wednesday, Tim O'Brien, senior director of platform strategy for Microsoft, told the audience at a Stifel Nicolaus technology conference that "there would be 80%-plus of the company's applications running in the cloud in some form or fashion within the next three to five years."

In late-afternoon trading on the Nasdaq Stock Market, Microsoft shares were down 21 cents at $28.07. The stock has gained about 23% in the past year.

— Matt Jarzemsky contributed to this article. Write to Steven D. Jones at steve-d.jones@dowjones.com