Did Microsoft Make the Right Choice Today?

Microsoft (NASDAQ: MSFT  ) has finally picked a CEO to replace retiring leader Steve Ballmer. That's good news, and Microsoft shares spiked as much as 2.6% higher as the veil of uncertainty lifted. To put this jump into context, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) only moved 0.6% higher this morning.

But then Microsoft investors started thinking about the actual CEO choice, and the share price lift disappeared. At one point, Microsoft investors lost money today. The stock is trailing the Dow by a respectable margin.

MSFT Chart

MSFT data by YCharts.

You see, Microsoft took the safe and predictable route. Satya Nadella, who becomes Microsoft CEO immediately, is a 22-year Redmond insider who is unlikely to shake the stagnant giant up very much. And a serious shake-up is exactly what this company needs right now.

Sure, Microsoft could have done a lot worse. Nadella steps up from leading Microsoft's enterprise and cloud computing group, as well as heading the server and tools division. These segments have outperformed Microsoft's Windows flagship under Nadella's leadership, and there's no question that a cloud computing focus will serve Redmond well for the next few years.

Another detail speaking in Nadella's favor is that Microsoft founder and guardian angel Bill Gates has stepped down as chairman of the board. Hence, the new chief executive might be able to get things done without Gates rubber-stamping every decision -- an uncomfortable possibility that may have kept several top candidates out of the running.

Satya Nadella, freshly anointed Microsoft CEO. Image source: Microsoft.

Is it all bad news?
So yeah, Nadella has a fighting chance to turn this sinking ship around. But it's far from a sure bet. Many factors still point to the status quo staying intact, no matter how much the new CEO promises to take Microsoft in a new direction. For example:

  • Gates may not sit on the chairman's throne, but he stays on Microsoft's board of directors and will remain an important influence over the company's future direction.

  • Right next to Gates' boardroom chair, you'll find Steve Ballmer. I'm very worried that this dynamic duo will set the tone for Microsoft, even in their reduced roles.

  • And don't forget that Nadella has spent more than two decades inside the Microsoft culture. That's enough to make him look like more of the same. Meet the new boss, same as the old boss.

Will we get fooled again? I don't think anything changed for Microsoft today, and this stock will continue to weigh on the Dow for years to come.

I hope I'm wrong, and that Satya Nadella brings fresh thinking and execution to Microsoft despite the roadblocks he will face. Until I see actual proof of a new direction, I remain skeptical of Microsoft's value to investors.

Gates never liked cloud computing, anyway...
There are few things that Bill Gates fears. Cloud computing is one of them. It's a radical shift in technology that has early investors getting filthy rich, and we want you to join them. That's why we are highlighting three companies that could make investors like you rich. You've likely only heard of one of them, so be sure to click here to watch this shocking video presentation!

Read/Post Comments (2) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 04, 2014, at 4:04 PM, techy46 wrote:

    Microsoft is first and foremost a provider of enterprise software for applications, development and productivity from clouds and data centers. Microsoft is secondly a provider of client and consumer software to use devices to access, browse and product content hosted in enterprise clouds and data centers. Microsoft made the right choice to server their customers in order of importance and if Wall Street or retail investors want an advertising or consumer technology investment go buy Apple or Google.

  • Report this Comment On February 05, 2014, at 7:55 AM, emilypeter389 wrote:

    I think its a good move, he was responsible for growth in MSFT cloud segment and can do the same for the entire company

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2823094, ~/Articles/ArticleHandler.aspx, 9/4/2015 4:16:53 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Anders Bylund

Anders Bylund is a Foolish Technology and Entertainment Specialist. Where the two markets intersect, you'll find his wheelhouse. He has been an official Fool since 2006 but a jester all his life.

Hypoallergenic. Contains six flavors not found in nature. Believes in coyotes and time as an abstract.

Follow Anders on Twitter, LinkedIn, and Google+.

Today's Market

updated 7 hours ago Sponsored by:
DOW 16,374.76 23.38 0.14%
S&P 500 1,951.13 2.27 0.12%
NASD 4,733.50 -16.48 -0.35%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/3/2015 4:35 PM
^DJI $16374.76 Up +23.38 +0.14%
MSFT $43.50 Up +0.14 +0.32%
Microsoft CAPS Rating: ***