Report: Chatter about Nadella's appointment as Microsoft CEO grows louder

The Wall Street Journal reported Friday that he's negotiating the terms of his contract with the board

Satya Nadella has been offered the Microsoft CEO job and is currently negotiating a contract with the company's board, according to The Wall Street Journal.

The Journal's article, posted Friday afternoon and based on information from an anonymous source, follows a Bloomberg report from Thursday evening -- also based on anonymously sourced information -- where it was first reported that Nadella had been picked to succeed Steve Ballmer after a five-month search process.

Microsoft's board is scheduled to meet early next week to ratify the contract, at which point an official announcement will follow, the Journal reported. The article also says Nadella has requested that co-founder and Chairman Bill Gates take on a new, active role as technology and strategy adviser to him.

Bloomberg also reported that along with Nadella's appointment, Gates might step down as chairman. Early Friday morning, Reuters also ran a story quoting one person who requested anonymity saying Nadella had been picked for the job.

If those reports are correct, Nadella will become only the third CEO in Microsoft's almost 40-year history, joining Gates and Ballmer in the exclusive club.

Nadella is currently executive vice president of the company's Cloud and Enterprise group, where he has successfully steered the shift of Microsoft's enterprise back-end servers and tools to the cloud.

The Cloud and Enterprise group is the new name given to what was known for years as the Server and Tools division, whose reins Nadella took over in February 2011. His tenure has been widely praised, as the group has posted strong revenue growth and the products and cloud services are considered solid technologically.

Nadella is also familiar with other product lines. He was senior vice president of research and development for the then-called Online Services Division, where he was closely involved with the Bing search engine, and was also vice president of the then-called Microsoft Business Division, which housed the Office desktop and server products.

Industry analyst Jack Gold from J. Gold Associates said via email that if Nadella is indeed chosen, it indicates that the board sees Microsoft's future in the enterprise and cloud computing.

"It is bolstering this direction through this choice. I'd expect to see a renewed emphasis on this direction going forward, although I don't expect to see any immediate jettisoning of other businesses, although I do expect it won't take more than 6 months or so to see what moves new management will make," Gold said.

Gold also said that it's significant that in Nadella the board has chosen an insider -- Nadella has been with Microsoft for more than 20 years.

"It indicates that they believe only an insider who understands the politics and ramifications of change within the structure of the organization can right the ship," Gold said. "This may or may not be the case, but as an insider, you are more likely to know where the bodies are buried and who the business winners and losers may be."

Nadella, a native of Hyderabad, India, joined Microsoft in 1992 from Sun Microsystems. He has a master's in computer science from the University of Wisconsin-Milwaukee and an MBA from the University of Chicago.

Since Ballmer made his surprising decision to retire in August, speculation about who would be his replacement and about why he decided to step down has been rampant in the press. Ballmer and Gates have made public appearances since then in which they have gotten emotional about the process to find a new CEO and about Microsoft's future.

In a blog post in December, John Thompson, a board member and the leader of the CEO search committee, revealed that Microsoft identified over 100 viable candidates and then interviewed "several dozen." The list was later narrowed down to about 20 people.

It was rumored that some candidates took themselves out of the running, citing concerns over the influence of Gates and Ballmer, who is one of the company's biggest individual shareholders. For a stretch of time, Ford CEO Alan Mulally was reportedly a front-runner, but he recently told Ford's board he had no plans to leave his job.

Microsoft didn't immediately respond to a request for comment.

Juan Carlos Perez covers enterprise communication/collaboration suites, operating systems, browsers and general technology breaking news for The IDG News Service. Follow Juan on Twitter at @JuanCPerezIDG.

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Juan Carlos Perez

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