Microsoft narrows CEO shortlist; Mulally, Elop make the cut

NEW YORK (REUTERS) - Microsoft has narrowed its list of external candidates to replace chief executive Steve Ballmer to about five people, including Ford Motor chief Alan Mulally and former Nokia CEO Stephen Elop, according to sources familiar with the matter.

The world's largest software maker also has at least three internal candidates on its shortlist, including former Skype CEO Tony Bates, who is now responsible for Microsoft's business development, and Mr Satya Nadella, the company's cloud and enterprise chief, the sources said.

Despite the narrower list - the company started with about 40 names - the process could take a few more months, the sources said. In August, Mr Ballmer said he would retire within 12 months. The names of other candidates could not be learned, but the search committee was interviewing executives from a wide range of sectors, including life sciences and consumer, the sources said.

Investors have pushed Microsoft's board in recent months to look for a turnaround expert, such as Mr Mulally or Computer Sciences CEO Mike Lawrie, to succeed Mr Ballmer. Some investors have also suggested to the board that co-founder Bill Gates should step down from his role as chairman, saying he stands in the way of radical reform at Microsoft.

Microsoft remains highly profitable and last month beat Wall Street's quarterly profit and revenue forecasts, but it has lost ground to Apple and Google in mobile computing. Mr Ballmer has focused on making devices, such as the Surface tablet and Xbox gaming console, and turning key software into services provided over the Internet.

Some investors say a new chief should not be bound by that strategy. They are concerned that, with both Mr Gates and Mr Ballmer up for re-election to Microsoft's board, they will retain their influence over the company.

Mr Gates has focused his day-to-day efforts on philanthropy since 2008, when he vacated his office on campus. People close to him say he is not considering a return to the CEO position.

Members of the CEO search committee have been speaking with dissenting shareholders, according to sources familiar with the conversations.

Activist shareholder ValueAct Capital Management was offered a board seat by Microsoft in August. Several sources said the investor will also be given the same access as the board to the final five candidates.