Mon, Feb 10, 2014 - Page 15 News List

Microsoft needs some clear leadership from Nadella

The Observer, LONDON

What would you most want as only the third-ever chief executive of a gigantic global company? Probably not to have your two predecessors on the board watching your every move, and the first boss giving up his role as chairman to take a more active day-to-day role.

That is the prospect facing Satya Nadella, who is just finishing his first week as chief executive of Microsoft, where his predecessor for 14 years, Steve Ballmer, is still on the board (possibly until November) and cofounder Bill Gates (who preceded Ballmer) announced plans to take a bigger role in the company.

Of course, if Nadella, who is 46 and a 22-year veteran of the company, is unhappy with this, he has not had time to say so. Yet for someone facing a sizeable challenge, it might be a couple of distractions too many. Publicity photos showed a relaxed-looking Nadella wearing a just-casual-enough hoodie and an energized expression, but below the calm surface, there is a lot of swimming going on.

Microsoft is hugely successful: It posted record revenue of US$24.5 billion for October to December last year and profit of US$6.6 billion (not a record: that came two years ago, with US$7.8 billion on revenue of US$21.5 billion).

Google, however, is close behind: It has just recorded US$16.9 billion of revenue and US$3.9 billion in profit for the quarter. Its revenue has doubled in two years, its market capitalization overtook Microsoft’s at the end of 2012 — and Google gets far more attention.

Microsoft has to choose whether to play it safe — focusing on the large “enterprise” customers who generate so much of its profit by buying its Office software, Server suite and Windows licences — or to go after everything else too. Its Xbox games console business may start showing a profit (the new Xbox One is selling strongly), but its Windows Phone software has been a laggard while Google’s Android and Apple’s iOS have roared ahead. And consumers have been turning their noses up at PCs and Windows 8 in favor of tablet computers — another area where Microsoft lags badly.

Nadella’s expertise is with those business customers, and with “cloud” services such as Azure. Gates himself suggested years ago that Microsoft could transform the world through smart services connected to the devices on our desks, in our pockets and on our wrists. Yet it failed to do that, and left the door open to Google, which grabbed it through smartphone services such as Google Now.

Nadella needs to impress people once again with what Microsoft can do in software. It has built a search engine (Bing) from scratch; it is vying for first place in the games console market; it has large research departments with deep thinkers. Google’s sugar-sensing contact lens for diabetics had been announced in 2012 by the same researcher in a project with Microsoft.

However, while Gates will want Nadella to rouse the troops into writing world-beating software, will he be able to stop himself interfering? Nadella needs to shake up a very politicized culture, with much warring between divisions. Ballmer began knocking down the walls; Nadella has to finish it.

Gates is surely too wise to see himself as Microsoft’s savior; he is not Steve Jobs at Apple, returning to bail out the company he founded. As long as he is bobbing along the corridors, who will truly be in charge? Nadella needs to have control. And that might mean asking Gates to take a long break while he does what he needs to for Microsoft to recapture its mojo.

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