Last week, Bloomberg reported that Microsoft's (MSFT) CEO search is now narrowing down to two candidates from the original five and the forerunners are Ford's (F) Alan Mulally and Microsoft's own Satya Nadella who currently serves Microsoft as the Executive Vice President for Cloud and Enterprise. It looks like Nokia's (NOK) Stephen Elop and another internal candidate Tony Bates are still in the race but either of these two aren't expected to win the race unless both Alan Mulally and Satya Nadella turn down the job.
Apparently, Microsoft is looking for someone who has an "extensive track record in managing complex, global organizations within a fast-paced and highly competitive market sector; track record of delivering top and bottom line results; proven ability to lead a multi-billion dollar organization and large employee base." Notice that the document mentions how the CEO should have experience with multi-billion dollar, complex and global organizations but it doesn't say anything about the industry. As a CEO who has served in the airplane and car industries managing multi-billion dollar, complex and global organizations, Alan Mulally becomes eligible for this criterion.
Because of Alan Mulally's age, he is not expected to serve at Microsoft for many years. He is expected to take a caretaker role where he helps with the development of the company's next CEO. Apparently, if he takes the job, Mr. Mulally will be developing either Satya Nadella, Stephen Elop or Tony Bates. Since he is also said to be leading the race along with Mr. Mulally, Satya Nadella looks like the most likely person that will be tailored for the job by Mr. Mulally in the coming years if Mr. Mulally takes the job at Microsoft.
Reportedly, many people in Silicon Valley actually prefer Tony Bates over Satya Nadella. Tony Bates is highly popular and he could help Microsoft rebuild the relationships that got damaged in the last 20 years due to Microsoft's ruthless business practices. For years, the perception enjoyed by Microsoft in Silicon Valley was of a cocky company. The company kept downplaying competition and threats as if it was invincible. For example, in 2007 as iPhone was being introduced in the market, Microsoft's CEO Steve Ballmer said: "There's no chance that the iPhone is going to get any significant market share. No chance." Later on, when asked about Android operating system, he reportedly said: "You don't need to be a computer scientist to use a Windows Phone and you do to use an Android phone ... It is hard for me to be excited about the Android phones." Whether Mr. Ballmer was correct or not is one issue, but the fact that he always underplayed any competition is important to note. This attitude has gained Microsoft a lot of enemies in Silicon Valley and Tony Bates could change that with his likeable personality (by the way I am not saying that Steve Ballmer is not likeable, he is more competitive and less cooperative than Tony Bates though). The personality and leadership style of Tony Bates is very similar to that of Alan Mulally. Ford's CEO is well-known for his charming personality and his ability to develop strong relationships with partners, supplies and competition.
Stephen Elop probably became a Plan B or Plan C at this point. Many people were upset with some of Mr. Elop's ideas which included getting rid of products like Bing and Xbox while focusing more on software, tablets and smart phones. Stephen Elop has a confrontational personality similar to Steve Ballmer. For example, last year, he was a guest at a Finnish TV show promoting Nokia's new phones. When the host of the show started bragging about his iPhone, Mr. Elop grabbed the phone and threw it on the ground. Of course he did this act half-jokingly, but this still speaks volumes about his personality style. This is definitely something Steve Ballmer would do but not something Alan Mulally or Tony Bates would even come close to doing.
Satya Nadella, the candidate that is seen as the most likely to win the race along with Alan Mulally, is well-liked at Microsoft. He is a very smart man and he understands the business very well. He has never ran a company that is as large and complex as Microsoft, which makes it appropriate for him to receive some "training" from Alan Mulally. After working at Sun Microsystems, Mr. Nadella moved to Microsoft in 1992 and he has been serving the company since then. He has headed several different divisions of Microsoft and played a major role in the company's recent transformation. He understands the challenges of Microsoft very well, and he knows the answers to most of those challenges. Since Mr. Nadella hasn't been on the media that much, his personality and leadership style is somewhat less known than the other candidates; however, if Microsoft's board trusts him enough to put him on top of the list, he must have some impressive leading skills.
As the race for the CEO job draws closer to the end, Microsoft continues to appreciate in price. Currently the company is valued at $318 billion or $38.13 per share. This is the highest the share price of Microsoft has been since the dotcom bubble of late 1990s. Back then, the company's high price was not well-deserved but today it is much more deserved as the company currently enjoys a low P/E of 11 excluding cash.
In the next few months, we will find out the next CEO of Microsoft. If Alan Mulally takes the job, we will also witness another CEO job being filled, as Ford's CEO position will be vacant. Many people believe that the insider Mark Fields will take the job since he has been under direct guidance and training of Alan Mulally in the last 8 years. This will also be an interesting race to watch if it comes down to that.
Disclosure: I am long MSFT, F. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
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