Microsoft CEO Nadella Sees Software As Key Differentiator


Microsoft Corporation (NASDAQ:MSFT)’s decision to make Satya Nadella its new CEO has been met with conservative support from investors and analysts who expect him to ably continue with Ballmer’s move towards devices and enterprise services, but early comments suggest that he sees software as Microsoft’s competitive edge.

UBS analyst Brent Thill met with longtime Microsoft watcher Mary Jo Foley, who had the opportunity to meet with Nadella in November 2013, and get her thoughts on where the Microsoft veteran wants to lead the company.

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Don’t expect strategy stagnation: Foley

“MJF spoke with Nadella in November 2013 where he indicated he was on-board with the divisional reorg and felt it was important for MSFT to keep its assets together, which suggests we won’t see spin-offs of assets like Bing and Xbox; however, she also does not expect strategy stagnation.,” writes Thill. “MJF noted that in early talks as CEO Nadella seemed to emphasize software as a key differentiator for MSFT going forward.”

That doesn’t mean Microsoft is going to pull back from its emphasis on enterprise services, but Nadella might not follow the Ballmer plan as closely as has been predicted, even though Nadella was the VP of cloud and enterprise before taking the helm and likely played a role in formulating the company’s current strategy.

Gates’ new position mostly PR: Foley

Foley also told Thill that she thought Gates’s new position as technical adviser, and the expectation that he’ll now be spending about a third of his time working at Microsoft as opposed to about 20% of his time before, is mostly just a PR move and won’t have much impact on the company’s future. No doubt the announcement was part of the reason this transition has gone over so well causing most analysts to leave their estimates intact (Thill rates Microsoft as a Buy with a $43 price target, but unchanged since the announcement).

Microsoft Windows 8.1 expectations

For this year, Foley said we can expect Windows Phone 8.1 in the spring, with new functionality meant to appeal to enterprise users, Surface 2 LTE, Office for the iPad and touch-first Office SKU by mid-year, and preview test builds for W9 (Threshold), Win Server 9, and ‘Mohoro’ (DaaS).