In a massive and surprising shift for Microsoft and its longtime leader, the company announced this morning that embattled CEO Steve Ballmer has decided to retire within the next year, after a process to select his successor.

Steve Ballmer at the Microsoft CEO Summit 2013. (Microsoft Photo).

Microsoft shares are up 7 percent on the news.

Here’s the full text of Microsoft’s news release announcing the plan. More to come.

REDMOND, Wash. — Aug. 23, 2013 — Microsoft Corp. today announced that Chief Executive Officer Steve Ballmer has decided to retire as CEO within the next 12 months, upon the completion of a process to choose his successor. In the meantime, Ballmer will continue as CEO and will lead Microsoft through the next steps of its transformation to a devices and services company that empowers people for the activities they value most.

“There is never a perfect time for this type of transition, but now is the right time,” Ballmer said. “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 Board of Directors has appointed a special committee to direct the process. This committee is chaired by John Thompson, the board’s lead independent director, and includes Chairman of the Board Bill Gates, Chairman of the Audit Committee Chuck Noski and Chairman of the Compensation Committee Steve Luczo. The special committee is working with Heidrick & Struggles International Inc., a leading executive recruiting firm, and will consider both external and internal candidates.

“The board is committed to the effective transformation of Microsoft to a successful devices and services company,” Thompson said. “As this work continues, we are focused on selecting a new CEO to work with the company’s senior leadership team to chart the company’s course and execute on it in a highly competitive industry.”

“As a member of the succession planning committee, I’ll work closely with the other members of the board to identify a great new CEO,” said Gates. “We’re fortunate to have Steve in his role until the new CEO assumes these duties.”

RelatedFull text: Microsoft CEO Ballmer’s email on his decision to step down

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  • Guest

    Thank you, Steve, for your 13 years of stewardship. Best wishes on your next job!

    • Alex

      Thank you, Steve, for destroying so much value that Bill built. For keeping the stock price flat when your competitors ate the market. For missing out on all the tech trends in the last 10 years and allowing Google, Facebook, and Apple to eat your lunch. Thank you for finally getting out of the way.

      • Guest

        Very accurate summary.

  • Kevin Lisota

    Wow. Earlier than anticipated. Despite the botched decisions of the last decade, it is hard to imagine a Microsoft without Ballmer. They’ll have a tall order to find a replacement. Someone who can grasp the huge complexities of their businesses and provide product vision, but more importantly, someone “spirited” who can rally the troops.

  • Guest

    Good news, but at least half a decade overdue. Indeed It was obvious from about 20005 that he was the wrong guy. But Gates and the board just kept ignoring the increasingly obvious signs of failure and erosion of MS’s competitive position. I bet even this move wasn’t chosen by Gates, the board, or Ballmer, but rather pushed by institutional investors. This may have been the price demanded for relenting on a board seat, for example. Gotta love when the board’s chosen one leaves and the stock goes *up*, and by that amount. That’s the ultimate statement on what te street thinks of Ballmer. Unfortunately the new CEO inherits a company that in almost every way is worse positioned than the one Ballmer did. But at least the clown show is coming to an end.

  • Lazslo Anton Zapotec

    Sadly for Mr. Ballmer, Microsoft will soon announce that the Board of Directors have decided to outsource the CEO position to Infosys.

    • JimNonameYo

    • Guest

      Um, you realize that makes no sense, right?

      • Lazslo Anton Zapotec

        I’m a bit surprised you apparently took this as serious as you did. But since you seem earnestly puzzled … perhaps I can explain the comment better.

        Infosys is one the world’s largest providers of outsource services. Microsoft and Mr. Ballmer have done quite well financially by outsourcing or off-shoring many positions to service providers,Infosys among them.

        My post was merely a sardonic comment on the nature of the
        universe related to the expression “what goes around, comes around” as it applies to Mr. Ballmer’s resignation announcement.

        I think the really interesting part will be discovering the reason
        why Mr. Ballmer chose to announce his resignation now, followed by who will replace him. My hope is that Microsoft will hold a Stack Rank Warrior MOBA tournament to fill the CEO slot, as I too have incredible chair-throwing game skills.

        • guest

          Yeah, I know who Infosys is. What I didn’t get is why Ballmer would care if it happened *after* he resigned?
          Anyway, I agree the replacement will be interesting. Frankly, it’s the only thing that matters now.

  • Ryanisinallofus

    Ballmer steps down, stock goes up, he makes $$$.

  • Christopher Budd

    Here’s hoping that a voluntary breakup is one of the options that the board will seriously consider.

    Microsoft is too big and too broad to be effectively run by one person or one management team now.

    It’s time to unlock the latent value in the company by breaking it up and letting the different pieces go free.

    And I’ll put my vote in that the new “Microsoft” name be kept for STB/Azure. They’re the parts of the company that have been doing great (quietly) for years and would be a worthy bearer of the name of the company that Gates built.

    • Guest

      That might have been a good strategic move in 2000 when competitors were mostly standalone. But unclear how it helps in 2013 when most of the serious threats are integrated and/or moving that way. And can we drop the “MS is too big to manage” meme? Apple is now twice the size of MS, yet managed quite effectively by one person. Also, Ballmer has tacked on a bunch of mostly unprofitable or marginally profitable businesses that any right-thinking CEO would spin off, thereby increasing focus and making the resulting company more manageable.

      • Christopher Budd

        Microsoft is too big to manage not from the number of people but from the strategic focus. Apple has a much tighter strategic focus regardless of numbers of people.

        One reason I advocate this so strongly is I’ve seen repeatedly businesses in Microsoft choose the 2nd or 3rd (or even 4th) most desirable option for that business in the interest of protecting “better together”.

        At any time Microsoft is competing with Apple, Google, Oracle, Sony, IBM, Yahoo, Acer, just to name a few. None of those companies compete with all those like Microsoft does.

        • Guest

          Google’s focus is just as broad if not broader. Again, not seeing a compelling argument. Apple is much bigger and Google “strategic focus” is at least as broad. Both are doing fine with one CEO.
          That has more to do with leadership and cultural deficiencies at MS. The same could be happening at Apple or Google despite their respective business plans, it just isn’t.
          Google competes with virtually all of those as well, at least on some dimension. And partners with some occasionally. Just like MS.

          You’re making a decent argument that MS’s leadership and culture isn’t up to the focus they’ve chosen. That doesn’t automatically support “split them up” as the panacea.
          Lou Gerstner faced a similar kneejerk “break it up” analysis when he took over IBM. He didn’t, instead focusing on rationalizing, improving leadership and execution. Not saying that’s necessarily the right move with MS. But what you avoided commenting on is my reference to increasingly integrated competitors just as your advocating going back to standalone companies.

          • Christopher Budd

            I didn’t avoid the integration point so much as try to address it obliquely given the short space here. To be explicit, yes companies are integrating but not to the full breadth that you have at Microsoft. There’s plenty of space for the integration you see at Apple and still split things up.

            I strongly disagree that any other company has as broad a portfolio. Until Apple makes game consoles, offers cloud services and makes database and email servers along with their consumer stuff it’s not the same. And the same argument goes for Google. We may just disagree there.

            The other point for a splitting up is the level of creative destruction that will introduce. You just won’t get that from a shuffle at the top.

            More importantly though, so long as products like Exchange are optimized for Windows first and everything else second (regardless of market share) being together is worse not better. And that’s the chief argument. I have seen TOO many sub-optimal decisions accepted by product groups because they needed to support (i.e. protect) Windows.

  • lunarmobiscuit

    Finally! But why would he finally step aside just months after the reorg? It won’t be truly complete by that time. The timing is odd…

  • GCV

    The perfect time for Steve Balmer to have left Microsoft was before he become CEO. He turned the company from a geeky nerdy company into a fat aging bald frumpy company – and that wasn’t a good thing.

  • Bob

    Right move. Wrong decade.

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