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Microsoft's US$84 million man: What's Nadella done to earn it?

Tim Greene | Dec. 18, 2014
Windows 10, cloud gains, lower license fees for hardware vendors are bold moves whose effectiveness is yet to be determined.

This fall the company released yet another device, Microsoft Band, a health-monitoring wristband that is supported by a range of cloud services based in Microsoft Azure.

Under Nadella Microsoft has stepped up the pace at which it releases Windows updates to reflect a new urgency within the company to deliver new products and respond to customer requests faster, as he very publicly demanded in a memo to the company's employees. "We will streamline the engineering process and reduce the amount of time and energy it takes to get things done," he wrote.

In corporate networks any operating system changes require extensive testing to see whether critical business applications behave properly, and that concern generally overrides whether the operating system is the latest. So Microsoft is offering three options for receiving updates starting with Windows 10, due out next year: the rapid pace for consumers, the critical and security updates-only, and the middle ground where businesses can adopt new features without disrupting business.

This is a more risky move by Nadella because if the rapid updates aren't carefully tested, they could result in some angry customers, but the company seems aware of that. "As mentioned," according to the Windows blog, "with Windows 10, we are aiming to reduce the need for the time-consuming and costly wipe-and-reload approach to OS deployment. We know that app compatibility is critical for business."

Executive overhaul
Nadella signaled early on that he had definite plans for the company by making personnel decisions to clarify whom he trusts and whom he didn't need. The company's business development head Tony Bates and its chief of marketing Tami Reller both opted to leave the company within Nadella's first month as CEO.

Nadella reshuffled some of the remaining top executives to make clear whom he trusts. Scott Guthrie became head of cloud and enterprise business, Stephen Elop (the former head of Nokia, which Microsoft bought) was put in charge of devices and Phil Spencer was put in charge of Xbox.

He has successfully avoided fading into the shadow of the two previous CEOs, Bill Gates and Steve Ballmer. Gates stepped down as board chairman when Nadella took over as CEO and has been enlisted to advise Nadella on technology being developed within Microsoft. Ballmer stepped down from the board in August to spend more time on other interests.

Stock price
While more than a quarter of Microsoft stockholders think Nadella is overpaid based on their vote to approve his compensation package, they have to be pleased with what his presence at the helm has done to the company's stock prices. It's trended upward since his appointment, and after more than a decade the price finally broke $50 last month. Nadella reported that revenues in the last quarter were up 24%. Despite the complaints, he seems to be delivering value to his shareholders.


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