All change for Microsoft and Gates

Company founder Bill Gates is also leaving the chairman role for a new role as technology adviser.

Nadella, 46, was previously an executive in charge of the company’s small but growing business of delivering software and services over the Internet.

He replaces Steve Ballmer and becomes only the third leader in the software company’s 38-year history.

Nadella, a 22-year Microsoft veteran, has been an executive in some of the company’s fastest-growing and most-profitable businesses, including Office and its server and tools business.

The company says Gates’s new role will be as a technology adviser on the board and that he will devote more time to the company. John Thomson will be the company’s new chairman.

For the past seven months, India-born Nadella was the executive vice president who led Microsoft’s cloud computing offerings. That’s a new area for Microsoft, which has traditionally focused on software installed on personal computers rather than on remote servers connected to the Internet. Nadella’s group has been growing strongly, although it remains a small part of Microsoft’s current business.

Analysts hope that he can maintain the company’s momentum in the rapidly expanding field of cloud computing while minimising the negative impact from Microsoft’s unprofitable forays into consumer hardware. Major rivals in cloud computing include Google, Amazon, Salesforce and IBM.

Microsoft’s cloud computing offering, Azure, and its push to have consumers buy Office software as a 100 US dollar-a-year Office 365 subscription are seen as the biggest drivers of Microsoft’s growth in the next couple of years. Both businesses saw the number of customers more than double in the last three months of the year, compared with a year earlier.

Those businesses, along with other back-end offerings aimed at corporate customers, are the main reason why investment fund ValueAct Capital invested 1.6 billion US dollars (£1bn) in Microsoft shares last year.

Last April, the fund urged investors to ignore the declining PC market, which hurts Microsoft’s Windows business, and to focus on the so-called “plumbing” that Microsoft provides to help companies analyse massive amounts of data and run applications essential to their businesses on Microsoft’s servers or their own.

“Satya was really one of the people who helped build up the commercial muscle,” said Kirk Materne, an analyst with Evercore Partners. “He has a great understanding of what’s going on in the cloud and the importance of delivering more technology as a service.”

Nadella is a technologist, fulfilling the requirement that Gates set out at the company’s November shareholder meeting, where the Microsoft chairman said the company’s new leader must have “a lot of comfort in leading a highly technical organisation”.

Born in Hyderabad, India in 1967, Nadella received a bachelor’s degree in electrical engineering from Mangalore University, a master’s degree in computer science from the University of Wisconsin, Milwaukee, and a master’s of business administration from the University of Chicago.

He joined Microsoft in 1992 after being a member of the technology staff at Sun Microsystems.

One of his first tasks will be integrating Nokia’s money-losing handset and services business. Microsoft agreed in September to buy that and various phone patent rights for 5.4 billion euro (£4.5 bn) in one of Ballmer’s last major acts as CEO. That deal is expected to be completed by the end of March.

Some hope he will make big changes that will help lift Microsoft stock, which has been stuck in the doldrums for more than a decade.