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Microsoft names cloud computing chief as next CEO

LOS ANGELES – Microsoft has named the head of its cloud computing business as the company’s next CEO, tapping a longtime insider to lead efforts to catch rivals in mobile devices and to offer more software and services over the Internet.

Satya Nadella replaces Steve Ballmer immediately to become only the third chief executive in Microsoft’s 38-year history. Company founder and first CEO Bill Gates is leaving his role as chairman to serve as an adviser. He will spend a third of his time working on future products and technology.

Nadella, 46, most recently headed the company’s small but growing cloud computing unit, in which customers buy software and services housed on distant servers connected to the Internet. It’s a departure from Microsoft’s roots making software installed directly on personal computers.

In addition to growing that business, one of Nadella’s first tasks as CEO will be the completion of Microsoft Inc.’s $7.3 billion purchase of Nokia’s phone business and patent rights – part of a plan to boost Windows Phone software in a market dominated by iPhones and Android devices.

The direction points the company toward an orbit occupied by rivals Google Inc., Apple Inc. and Amazon.com Inc. and away from the core PC business that has been Microsoft’s mainstay.

“Going forward, it’s a mobile-first, cloud-first world,” Nadella said in a video accompanying the announcement Tuesday.

Nadella, who has worked at Microsoft for 22 years, vowed to remove any obstacles that prevent the company from innovating and said he would capitalize on Microsoft’s experience in making the industry’s leading productivity software package, Office.

“We need to be able to pick the unique contribution that we want to make,” he said. “That’s where our heritage of having been the productivity company...is what we want to get focused on.”

Gates, meanwhile, will remain on the company’s board. The new Microsoft chairman will be board member John Thompson, who led the search for a new CEO after Ballmer said in August that he planned to step down.

Thompson said Nadella was the board’s “first and unanimous choice.” Other candidates considered included Ford CEO Alan Mulally and other insiders such as Chief Operating Officer Kevin Turner and former Skype head Tony Bates.

Nadella has “the right background to lead the company in this era,” Gates said in a video message. “There’s a challenge in mobile computing. There’s an opportunity in the cloud. The various business groups he’s worked in, he’s driven innovation, gotten architectures put together that really meet the needs of our customers. The opportunity for Microsoft is greater than ever before.”

Nadella has been an executive in some of the company’s fastest-growing and most-profitable businesses, including its Office and server and tools business. In four years as division president, he helped grow that business into one with $20 billion in annual revenue – about a quarter of Microsoft’s total revenue in the most recent fiscal year.

For the last seven months, he was the executive vice president who led Microsoft’s cloud computing offerings. Nadella’s new cloud enterprise group has also been growing strongly, more than doubling customers in the latest quarter – although it remains a small part of Microsoft’s current business.

Analysts hope that Nadella can maintain the company’s momentum in cloud computing services and business software while minimizing the negative effect of Microsoft’s unprofitable forays into consumer hardware. It’s a transition IBM Corp. succeeded in making in the 1990s, but that companies such as Hewlett Packard Co. and Dell Inc. have struggled with.

Microsoft shares rose 13 cents, to $36.61, in midday trading Tuesday.

Barbara Ortutay of the Associated Press in New York contributed to this story.

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