Microsoft said to be close to naming a new chief

Seattle: Microsoft has spent five months looking for a new face to help the company evolve along with the mobile age. Turns out, it seems to be choosing a familiar face and largely sticking to its current path.

The company is close to naming Satya Nadella, head of its corporate software and cloud computing business, its next chief executive, according to people briefed on the process. Nadella's selection has not been completed, but it could be announced as early as next week, said these people, who spoke on the condition of anonymity.

As part of its conversations with Nadella, the Microsoft board has also discussed possible changes to the role of Bill Gates, the company's co-founder, these people said. One possibility is that Gates will step down as chairman, keep his board seat and become more involved as a strategic adviser for Nadella. The board has not made a final decision on Gates, and he could remain as chairman, one of these people said.

The move to pick Nadella as its next chief executive - he would be only the third in the company's history of almost 40 years - is a sign that Microsoft does not intend to pursue the kind of far-reaching shake-up many people within the industry have called for.

Companies in crisis, and even those a little off-balance like Microsoft, often recruit new leaders from the outside to bring in a fresh pair of eyes, among other things. Microsoft, too, considered a broad group of external candidates, including Alan R. Mulally, chief executive of Ford; John J. Donahoe, chief executive of eBay; and Paul Maritz, a former Microsoft executive who now runs a startup called Pivotal.

In the end, though, Microsoft gravitated to Nadella, a 22-year Microsoft employee who is fluent in Microsoft's rough-and-tumble culture and comes with the kind of strong technical skills Gates was said to favor in a new leader.

Bloomberg reported the possible changes Friday. Microsoft declined to comment.

One reason Nadella, 46, emerged as the board's choice is the sheer vastness of Microsoft. The company has about 100,000 employees and will add another 32,000 through its acquisition of Nokia's mobile phone business.

And the company is in the process of a major reorganization. Before the current chief executive, Steve Ballmer, announced his plans to retire from Microsoft in August, the company began a significant restructuring meant to increase responsiveness to new developments in the industry, namely mobile devices, and discourage infighting between its powerful divisions.

The board concluded that Nadella would be able to quicken the pace of new products and innovation better than someone from the outside, who would be less familiar with the company's fractious politics, one of the people with knowledge of the deliberations said. Microsoft does not have a great track record of embracing outsiders brought into executive jobs.

"Microsoft chews up and spits out new hires in senior roles," said Charles Fitzgerald, a former strategist at Microsoft. He added about Nadella: "He knows where the bodies are buried."

But there remains some concern that Nadella will be too beholden to Microsoft's past, including Gates and Ballmer, the two previous chief executives.

"We do not want to see a continuation of the existing direction for the business," Rick Sherlund, an analyst with Nomura Securities, wrote in a research report Friday. "So it will be important that Mr. Nadella be free to make changes."

Wall Street analysts and investors have long complained about Microsoft's missteps in the mobile market, where the company has ceded leadership to Apple, Google and Samsung. And it has lost billions of dollars on its efforts to compete with Google in the search business. Many Microsoft critics say the company must become more focused, perhaps by shedding businesses like its Bing search engine and Xbox game console.

Microsoft has also faced growing pressure to return more cash to shareholders. In August, it averted a potentially nasty public fight with an activist shareholder, ValueAct, reaching an accord that gives ValueAct the right to nominate one of its executives to the Microsoft board in the coming months.

While it is possible that Gates could step down as chairman, it does not appear that doing so would distance him from the company. He has considered changing his role on the board to free up time to advise Nadella on product and technology issues, a person with knowledge of the discussions said. Gates plans to continue his full-time responsibilities as a philanthropist.

A spokesman for Gates declined to comment.

There is speculation that John W. Thompson, Microsoft's lead independent director, could assume the chairman role. He might be viewed as a more friendly ambassador to investors than Microsoft's management has been in the past.

For all of its challenges and missteps in recent years, Microsoft is far from being in dire straits. It remains highly profitable, far more than many of its industry peers, and has tens of billions of dollars in cash. While the personal computer business is in a slump, hurting recent earnings, the company's most recent financial results showed signs that Microsoft was performing better in the market for consumer devices.

Nadella, a native of Hyderabad, India, is a popular choice internally. Most recently, he has led the enterprise software and cloud computing businesses at Microsoft, among the strongest and fastest-growing parts of the company. He joined Microsoft in 1992 from Sun Microsystems, and he has a deeper engineering background than many of the other internal candidates who have been considered.

Many advocates for change at Microsoft say the company's leader needs stronger technical expertise than Ballmer, who has a sales background. Nadella, however, does not have a track record in consumer businesses, which are becoming a bigger part of the company's focus through its Xbox game console and Surface tablets and the Nokia mobile unit.

Rick Devine, chief executive of TalentSky, a firm that has recruited executives for Microsoft in the past, said he believed Microsoft had the right strategy in place to improve its position in mobile and other markets. Devine, who recruited Timothy D. Cook, Apple's chief executive, to come to the company in the late 1990s, said Nadella was the most stable candidate for the board to pick.

"Satya is the stay-the-course guy," Devine said.