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Mulally move to Microsoft seems much less likely: Pro

Wednesday, 18 Dec 2013 | 1:01 PM ET
Microsoft seeks technical CEO: Pro
Wednesday, 18 Dec 2013 | 11:11 AM ET
Rick Sherlund, Nomura Securities, weighs in on the search for Microsoft's next CEO and explains why he is less confident Alan Mulally will make the move to the software giant. CNBC's Jon Fortt weighs in.

Ford CEO Alan Mulally appears less likely to become the next chief executive at Microsoft as the software company seeks "dark horse" candidates from Silicon Valley rather than Detroit, Nomura's Rick Sherlund told CNBC on Wednesday.

Sherlund, head of technology equity research at Nomura, cited a blog post published Tuesday from Microsoft board member John Thompson reiterating founder Bill Gates' statement that the chief executive was "a complex role to fill, involving a complex business model and the ability to lead a highly technical organization and work with top technical talent."

Thompson said he expected the board to finish its search in early 2014, and his statement leaves Sherlund less confident that Mulally would head for Microsoft after Ford.

"Just reading between the lines, ... [it] implies that maybe the dynamics of the board are shifting from just a good general manager who could help enhance shareholder value and can work with technical people who could fix the business," Sherlund said on "Squawk on the Street." "It seems to me that perhaps Bill Gates is digging in his heels now and saying, 'We want technical leadership.'"

(Read more: Microsoft expects early 2014 CEO choice)

Ford Motor CEO Alan Mulally
Adam Jeffery | CNBC
Ford Motor CEO Alan Mulally

Wall Street would most likely prefer a proven, all-purpose manager such as Mulally rather than someone with a technical background, such as former Microsoft and VMware executive Paul Maritz, Sherlund said. According to Reuters, sources familiar with the selection process said Microsoft had whittled down the search to a "handful of candidates," including Mulally, one outside candidate from the tech industry, and one or two internal candidates.

(Read more: Surprise! Qualcomm names new CEO and president)

"The concern would be that you get a good technical person who maybe isn't as focused on shareholder value," Sherlund said. "So there's a real trade-off here. The technical people that you might appeal to in Silicon Valley haven't run a business with 130,000 employees and executed a turnaround."

Microsoft's stock has seen a 30-percent increase in the past year. However, closing out the end of the year without naming a successor to CEO Steve Ballmer makes it an "awkward time" for investors. As of Wednesday afternoon, however, the stock was down 1.5 percent.

(Read more: White House names Microsoft exec to run Healthcare.gov)

"Some investors are going to say, 'There's more uncertainty here. Why do I want to wait around and see what happens,'" Sherlund said. "If Mulally or someone who the Street feels really good about came in, the stock's up probably have 10, 15 percent pretty quickly."

Sherlund said he doesn't see Ballmer staying on the board if members choose a chief executive who wants to shake up the company.

"You're going to replace a Ballmer and want to make some change," Sherlund said. "I don't think that's a pleasant experience for Ballmer to remain on the board when everyone is changing everything you are doing."

— By CNBC's Jeff Morganteen. Follow him on Twitter at @jmorganteen and get the latest stories from "Squawk on the Street"

Disclaimer

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  • Matt Hunter is the senior technology editor at CNBC.com.

  • Cadie Thompson is a tech reporter for the Enterprise Team for CNBC.com.

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.

  • Jon Fortt is an on-air editor. He covers the companies, start-ups, and trends that are driving innovation in the industry.

  • Lipton is CNBC's technology correspondent, working from CNBC's Silicon Valley bureau.

  • Mark is CNBC's Silicon Valley/San Francisco Bureau Chief covering technology and digital media.

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