Foley on Microsoft

Satya Nadella's One-Year Report Card as Redmond's CEO

Here's how Microsoft's third CEO did in his first year.

• By Mary Jo Foley
• 01/26/2015

Feb. 4 marks one year since Satya Nadella took the helm as the third Microsoft CEO in the company's 40-year history.

People often ask how I think he's fared during his first 365 days on the job. I've maintained and continue to say he's done better and differently than I had expected.

Nadella -- one of a small handful of rumored internal candidates for the Microsoft CEO job -- has a 23-year resume with the company. As of 2011, he ran the lucrative Microsoft server and tools business. His official title, in the July 2013 "One Microsoft" reorg, became executive vice president of cloud and enterprise.

Many, me included, wondered whether Microsoft might need an outsider to truly shake things up at the company once former CEO Steve Ballmer announced he was on his way out. The fear: Given his long tenure with Microsoft, Nadella might be too steeped in the old ways of thinking to acknowledge the new realities the company was facing.

But Nadella has disproved that fear. He was fairly aggressive on the shake-up front over the past year. Though a number of the initiatives with which many credit to him are actually strategies that Ballmer put in place before he left, such as open sourcing much of .NET and introducing Office on iPad before touch-first Office for Windows, Nadella has given them his backing.

Nadella has repositioned Microsoft yet again, this time from a devices and services company to a productivity and platforms company. He has championed the idea that Microsoft's strength is developing software and services, not hardware, even though the company -- at least for now -- will continue to make phones, Surface tablets, Perceptive Pixel displays, wearables and Xbox gaming consoles. The spin he's put on this is that hardware for Microsoft will take a supporting role, and will showcase and highlight its real crown jewels, which are software and services. Though some inside the company aren't happy that Microsoft isn't continuing futilely to try to be Apple, many investors are happy, as the stock price climb over the past year has demonstrated.

Those investors also have applauded Nadella's cost-cutting moves, including the tough decision to lay off 18,000 last year, the biggest job cuts in Microsoft history. Investors remain less bullish about his backing of Bing, but Nadella is sticking to his guns, insisting the Bing value to Microsoft is not just as a distant, second-place search engine, but more important, an engine and repository for new and coming services such as machine learning and language translation. Some Wall Streeters are still hoping and calling for Nadella to sell off Xbox, but so far, he sees Xbox as a valuable piece of the Microsoft gaming software/services play.

Nadella came into the CEO role at a tough time for Microsoft. Yet, so far at least, he hasn't blamed (at least publicly) Ballmer or other Microsoft leaders for taking the company down the wrong path on the mobile and hardware fronts. There haven't been any "Ballmer's baggage" stories attempting to justify the tepid reception of Windows 8 or the stagnant market share of Windows Phone.

Yes, the first year for any new leader is often a honeymoon period. But after the backlash following Nadella's public gaffe last October regarding his opinion on how women should ask for raises, that honeymoon was cut short. He retracted quickly and took actions to make supporting women and minorities a more visible priority.

If 2014 was all about proving that "platforms" for the new Microsoft meant non-Windows devices, 2015 will be all about servers and clouds and will be the year Nadella needs to show the world why Windows is still as good, if not a better, platform than those of its competitors. Nadella needs Windows 10 to be well-received. He needs to prove to the Microsoft developer and IT pro communities that the company still understands their needs and wants and deserves them in its corner. And he might want to remember that even though hoodies are cool, the suits-and-tie crowd still pays Microsoft's bills.