Tech

Satya Nadella credits Steve Ballmer for pushing Microsoft into the cloud

Key Points
  • Satya Nadella helped build Microsoft's cloud while Steve Ballmer was in charge and he credits his predecessor for pushing the company in that direction.
  • "The guy who gave me permission to do all this was Steve Ballmer," Nadella told CNBC's Jim Cramer on Thursday.
  • Microsoft's stock price has more than quadrupled in value since Nadella took the helm.
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Satya Nadella credits Steve Ballmer for pushing Microsoft into the cloud

Microsoft's stock price has more than quadrupled since Satya Nadella took over as CEO six years ago, thanks to the company's rapid growth in cloud computing.

But Nadella credits his predecessor, the louder and more outspoken Steve Ballmer, for making the decision to take on Amazon Web Services in cloud infrastructure, where Microsoft is now the clear No. 2 player.

"The guy who gave me permission to do all this was Steve Ballmer," Nadella told CNBC's Jim Cramer on Thursday, in an interview on "Mad Money" from Microsoft's headquarters in Redmond, Washington. "He wanted us to be bold and go at the cloud very aggressively, and that's what we did."

With a market value of $1.27 trillion, Microsoft is the third most valuable public company, behind Saudi Aramco and Apple. The stock rose 58% in 2019, its best year in a decade, and continues to push the S&P 500 higher.

Microsoft's stock under Nadella
CNBC

The story was much different during Ballmer's tenure, as sales growth slowed and the stock flatlined. But even in those years, Ballmer's Microsoft was in the early phases of assembling a cloud that could challenge AWS. Azure was announced in 2008, six years before Nadella became CEO.

Nadella then took steps to make Azure an easier choice for software developers. Two months after he became CEO, he changed Windows Azure to Microsoft Azure, underscoring the service's ability to handle computing tasks from Linux, which had long been a rival to Windows. Nadella also forged partnerships with competing companies like Red Hat and SAP.

While Nadella wants to recognize Ballmer for guiding Microsoft toward the cloud, he's made a number of decisions to undo moves made by the prior CEO, who now owns the NBA's Los Angeles Clippers.

Nadella backed Microsoft away from mobile hardware by selling off the feature phone business it picked up with the 2013 acquisition of the Nokia devices and services business. And while Windows was at the very center of Microsoft under Ballmer and even Bill Gates, in October Nadella told Wired that "the operating system is no longer the most important layer for us."

Steve Ballmer, left, and NBA Commissioner Adam SIlver attend an NBA playoff game between the Oklahoma City Thunder and the Los Angeles Clippers at Staples Center on May 11, 2014 in Los Angeles.
Noel Vasquez | GC | Getty Images

Under Nadella, cloud has become the centerpiece of the business, with Azure serving as the backbone for cloud-based Office applications and other services for personal and home use as well as powering other large enterprises and government agencies. On Thursday, Nadella called out cloud customers Marks & Spencer, Walmart and Walgreens.

"I think you have to have conviction on where the world is going, make sure you bet long before anybody gives you credit for it, and then, of course, execute," Nadella said. "That's what we have done in every layer of the stack."

In comparing the Microsoft of today to the company Gates led in the 1970s, Nadella highlighted the current focus on artificial intelligence, distributed computing and "completely different ways to think about even end-user computing with things like HoloLens."

There's one fundamental similarity.

"But guess what?" he said. "It's software."

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