MENU

Microsoft’s CEO search loses its brightest star

As far as metaphors go, it’s by no means a stretch to say tech giant Microsoft (NASDAQ: MSFT)  is opening a new chapter, in more ways than one.

In the wake of longtime CEO Steve Ballmer’s announcement that he’ll be leaving Microsoft after 13 years at the helm of the software giant, Microsoft is in the midst of a high-profile search for a new CEO.

The search for a new leader is arguably the most important storyline to affect Microsoft in some time, as Ballmer’s replacement will be charged with crafting a grand new vision for the company. As with many high-profile CEO searches, Microsoft has no shortage of qualified candidates from which to choose.

However, news broke this week that Alan Mulally, CEO of Ford (NYSE: F) , and perhaps the odds-on favorite to land the Microsoft top spot, has removed his name from the list of potential candidates.

Microsoft is worse off for it.

Losing a good one

Mulally’s work at Ford has been nothing short of miraculous — the stuff of business legend.

Many viewed the move as a sign of desperation at the time. However, the combination of improvements to Ford’s business and the influx of fresh capital allowed Ford to weather, and ultimately emerge strong from, the absolutely brutal new-vehicle market during the Great Recession, while its two domestic rivals, General Motors and Chrysler, needed government lifelines to stay afloat. Mulally landed at Ford in 2006 after many successful years at aerospace giant Boeing. Almost immediately, he initiated several dramatic steps to fundamentally reshape Ford, including reworking Ford’s manufacturing and cost structure, as well as arranging US$23.6 billion  in loans to support those efforts.

All told, in his time as CEO, Ford’s profits have swung from a loss of US$12.6 billion in FY 2006 to profit of US$5.7 billion over the past 12 months. In the process, Ford’s stock has more than doubled, despite the Great Recession, more than doubling the performance of both the Dow Jones Industrial Average and S&P 500.

On to the next one

Unfortunately for Microsoft, Mulally announced this week that he plans to remain at Ford through at least the end of 2014.

With Microsoft hoping to conclude its CEO search by the end of 2013, although more realistically early 2014, Mulally’s decision to remain at Ford shifts Ballmer’s likely successor to one of several key inside candidates.

Four names sit closest to the top of the list – Satya Nadella, Stephen Elop, Tony Bates, and Kevin Turner. Nadella runs Microsoft’s cloud and enterprise business. Elop is returning to Microsoft after helping engineer Nokia‘s turnaround efforts. Bates leads Microsoft’s business development efforts and formerly ran Skype, which Microsoft acquired in 2011. Finally, Turner is Microsoft’s chief operating officer, meaning he heads Microsoft’s global sales, marketing, and services organizations.

This is a bumper crop of candidates to be sure — talented and experienced with long track records of success. However, despite their credentials, each candidate suffers from one major blemish: They’re insiders.

More of the same

Microsoft’s shares have run up to their highest point in 13 years in part because investors finally sense change in the wind at the tech giant. Although its financial performance has been stronger than often admitted during Ballmer’s tenure, like it or not, Microsoft suffers from a perception that it’s lost its way amid the rapidly evolving technology industry.

And although one of these several internal candidates could be the much-awaited savior ready to lead Microsoft into the next phase of its existence, an internal candidate will likely be interpreted as a let down to investors in the short term.

This is, of course, a highly fluid storyline. New or old candidates, especially Ford’s Mulally, could be brought back into the mix in the coming weeks and months.

Either way, with Microsoft still being one of the most important names in all of technology, this storyline is one of the must-watch items for technology investors today.

The Australian Financial Review says "good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit." Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

A version of this article, written by Andrew Tonner, originally appeared on fool.com.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.