Microsoft: Is Alan Mulally Really Not The Guy?

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Wall Street has been going nuts speculating about who will be Microsoft Corporation (NASDAQ:MSFT)’s next CEO. Many investors are hoping current Ford Motor Company (NYSE:F) CEO and turnaround expert Alan Mulally will go to Microsoft and fix everything up. However, this week a Ford spokesperson said Mulally is “staying through the end of 2014.” So does this mean Mulally’s definitely not the guy? And if not, who is?

Wall Street’s expectations for Microsoft

MKM Partners analysts Israel Hernandez and Tyler Radke have reiterated their Neutral rating and $30 per share fair price estimate on Microsoft. They believe that Wall Street was already pricing in Mulally being Steve Ballmer’s replacement.

They note that Mulally is an outsider and also one of Ballmer’s closest advisers. Wall Street likely sees him has a major change agent and as someone who, in their words, would attack Microsoft’s “sacred cows” like online search and the Xbox. Of course investors would also expect him to change the culture at Microsoft Corporation (NASDAQ:MSFT), introduce “more financial discipline,” and turn the company’s focus to enterprise and cloud.

If not Mulally, then who?

The analysts note that if Mulally isn’t going to be the next CEO, then the other candidates all appear to be insiders. They list EVP Cloud and Enterprise chief Satya Nadella, ex-Nokia Corporation (NYSE:NOK) CEO Stephen Elop, Business Development EVP Tony Bates and Chief Operating Officer Kevin Turner. Another name which has been suggested by some is Pivotal CEO Paul Maritz, but the analysts at MKM see him as “a long-shot.”

They said although all of these executives are accomplished, they don’t see any of them as representing the kind of dramatic change agent Wall Street is hoping for. The analysts also said their checks suggest that former Skype CEO Tony Bates has “strong internal support among rank and file” at Microsoft.

What kind of CEO does Microsoft’s board want?


The team at MKM suggests that Microsoft Corporation (NASDAQ:MSFT)’s board of directors is split on what kind of CEO they want. They believe Bill Gates and Ballmer want a “technology leader” who would be focused on opportunities in both consumer and enterprise. However, they think “the activist camp led by ValueAct” is looking for a “financial engineer.” They don’t think Wall Street will like an internal hire who “will be seen as a status quo guy.” They believe investors want to see big changes at Microsoft—changes which would probably only be made by an outsider.

As far as Mulally goes, they don’t think all hope is lost, however. They don’t think the comments from the Ford spokesperson or even from Mulally himself are definitive. They note that Mulally avoided answering some questions and believe that if he officially wasn’t in the running any longer, he would simply have just said so, unless he had not yet told Microsoft Corporation (NASDAQ:MSFT) yet.


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