Bill Gates has quit as Microsoft chairman to take up a new role as technology adviser in a management shake-up that will see Satya Nadella become chief executive.
The announcement ends a long search for a new chief after Steve Ballmer announced his intention to retire in August.
Mr Nadella is only the third chief executive in Microsoft’s 39-year history, following co-founder Bill Gates and Steve Ballmer.
“During this time of transformation, there is no better person to lead Microsoft than Satya Nadella,” said Bill Gates in a statement. “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.”
Mr Gates will support Mr Nadella “in shaping technology and product direction”, Microsoft said.
Microsoft also said John Thompson, the senior independent director, will succeed Mr Gates as chairman, the company said in a statement.
Shares of the world’s largest software maker rose 1pc in early trading.
Few people outside Microsoft had ever heard of Satya Nadella until last Thursday, when the Indian-born executive was named as the most likely candidate to become chief executive of the technology giant.
He has been promoted from executive vice president of the cloud and enterprise group, a role he was promoted to in July last year by the departing Mr Ballmer.
The 46-year-old technology chief has spent almost half his life at Microsoft, largely involved in so-called “enterprise” products that are geared towards businesses rather than consumers. He currently leads its enterprise and cloud division.
The appointment comes at a crucial juncture for the company. Mr Gates built the computer giant on the principle that if the software was good enough, the rest would surely follow. It was a strategy that worked for decades. Microsoft Windows was so far ahead of the competition, computer manufacturers installed it in their products by default.
However, the world eventually changed around it and gadgets rather than software became the keys to success. Apple set out with the opposite vision, staking its future on the notion that if its hardware – glossy Macs, iPhones and iPads – was good enough, it could persuade customers to swap Windows for their own iOS platform. The company that had once nipped at Microsoft’s heels toppled it from its position as the biggest technology business in the world.
Somewhat reluctantly, Microsoft was forced to change. Over the past two years, it has produced its Surface tablet, bought Nokia’s mobile handset business and launched Windows 8, a radical reinvention of its iconic operating system that is designed to allow people to flip easily between tablets and PCs.
None of these initiatives caught the public imagination, and the launch of Windows 8 ranked as a disaster, both in its timing and execution. Morale suffered, with staff and investors complaining that the computer giant had lost its culture of innovation.
The cycle of decline has also taken its toll on Microsoft’s shares. They have fallen more than a third since Mr Ballmer’s appointment in 2000.
However, analysts and investors who hoped Mr Ballmer’s successor would usher in a more glamourous era of Microsoft could be disappointed. Mr Nadella’s roots are in enterprise computing, and this is likely to remain his focus.
Microsoft’s promises of “end to end business solutions” may not be as sexy or fast-growing as Google’s web search or Apple’s shiny hardware, but they are still a valuable cash cow. The company’s revenues climbed 14pc to $24.51bn in the last three months of 2013, while profits hit $6.6bn, up from $6.4bn in the same period the previous year.
Mr Nadella would do well to make Microsoft more competitive, by sharpening innovation, cutting dead weight and boosting morale. But analysts think he is unlikely to spearhead any major reinvention of the company as a purveyor of consumer gadgets.
Mr Gates shifted his focus away from the computer giant many years ago, preferring to devote his time and public profile to improving world health though the Bill and Melinda Gates Foundation, the charity he established with his wife.
However, his departure as chairman still marks a historic moment for the technology business he founded as a student.
In his first interview as CEO, Mr Nadella said the way he thought had been shaped by his life’s experience, and that he “loves to learn”.
“I get excited about new things, I buy more books than I read or finish, I sign up for more online courses than I can actually finish, but the thing about being able to watch people do great things, learn new concepts is something that truly excites me.”
When asked why he wanted to become CEO of Microsoft, he said the company was central to applying human potential to a world becoming more rapidly software-driven.
He said he felt “honoured, humbled and excited” to be CEO. “We have tremendous opportunity, and that’s inspiring.
“I want every one of us to find more meaning at work. We spend far too much time at work for it not to have deep meaning.”
Mr Nadella grew up in Hyderabad, India and his appointment as CEO makes him the most powerful Indian-born tech executive in the world.
He received a Bachelor of Engineering in Electronics and communication from the Manipal University in 1988. Former teacher and MIT director Vinod V Thomas told the Times of India he “cannot vividly recall” Mr Nadella as he “didn’t figure in either ends of the spectrum”, but added that records showed he was “a first-class student who achieved distinction.”
Following his move to the United States, he went on to study Computer Science at Masters level at the University of Wisconsin–Milwaukee, and received a Master of Business Administration from the University of Chicago Booth School of Business.
Mr Nadella began his extensive career in tech at internet software pioneer Sun Microsystems, before joining Microsoft in 1992, where he has remained for 22 years.
His roles have included senior vice president of Research & Development for the Online Services Division, and president of the Server and Tools Business, where he championed the switch from client services to Cloud-based infrastructure.
He headed up the teams in charge of the Cloud OS, which powers all of Microsoft’s internet scale cloud services.
He has been married to his wife for 22 years, whom he met in high school, and has three children with.
In an email to all Microsoft employees, Mr Nadella said “Today is a very humbling day for me. It reminds me of my very first day at Microsoft, 22 years ago.
“Many companies aspire to change the world. But very few have all the elements required: talent, resources, and perseverance. Microsoft has proven that it has all three in abundance. And as the new CEO, I can’t ask for a better foundation.”