After 33 years at the company, Microsoft CEO Steve Ballmer will retire within the next 12 months. Until a successor is chosen, Ballmer will continue as CEO, the company said this morning.
"There is never a perfect time for this type of transition, but now is the right time," Ballmer, 57, said in a statement. "We have embarked on a new strategy with a new organization and we have an amazing senior leadership team. My original thoughts on timing would have had my retirement happen in the middle of our company's transformation to a devices and services company. We need a CEO who will be here longer term for this new direction."
The company said lead independent director John Thompson will head up the search for a new CEO and the committee will include founder and Chairman Bill Gates. Investors cheered the news, sending Microsoft shares up 6.7 percent to $34.57 just after the opening bell in New York.
Ballmer, who was Microsoft's 30th employee, has been CEO since 2000. He's overseen a period of change as the world's largest software maker has transitioned away from its focus on PC operating systems to multiple platforms and hardware such as tablets. But the company's rapid growth days are long past, with the shares trading in the $20 to $40 range since his tenure began while rivals including Apple have increased their shares 10-fold.
Ballmer met Gates in 1973 while they were living down a dormitory hall from each other at Harvard University. He took over from Gates to run the company, first with him, then on his own in later years.
The news of Ballmer's departure comes after major company restructuring, which he spearheaded to get Microsoft's different product divisions working better together. As a result of the organizational change, Julie Larson Green took over as head of the devices and studios group, which oversees the hardware development of everything from the Surface to the Xbox. Before those changes, Windows 8 chief Steven Sinofsky left in November 2012 and Xbox chief Don Mattrick departured in June to take over as CEO of Zynga.
"The latest reorganization appeared to be a prelude to choosing a successor," said Ross Rubin, principal analyst Rectile Research. "Microsoft has tremendous assets but the new CEO will need to move Microsoft's existing franchises such as Windows and Office into a new era if tablets and smartphones while building what's been a dormant device business outside of Xbox."
The move caught many by surprise.
"It was a bit of a surprise but not a shock," said Norman Young, senior equity analyst with Morningstar.
Young was surprised Ballmer would leave the company shortly after its strategic reorganization, though investors have increasingly called for him to step down over the past few years.
"He's done a pretty good job nurturing and growing the core businesses, the three main pillars of the company, but he has done not such a great job in larger strategic questions when it comes to the company," Young said. Those questions include Microsoft's role in mobile competition, Internet search, and moving enterprises to the cloud.
"Those are the things that would be pretty big knocks against him," Young said.
After the announcement, Young said investors breathed a "collective sigh", driving up the stock price, which had stayed flat over Ballmer's tenure.
"People see this as an opportunity to get a fresh perspective, whether an insider or outsider's perspective," Young said.