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Microsoft CEO Ballmer to retire within 12 months

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Steve Ballmer (Credit: Reuters/Robert Galbraith)

By Bill Rigby and Sinead Carew, Reuters

SEATTLE/NEW YORK (Reuters) - Microsoft Corp Chief Executive Steve Ballmer unexpectedly announced his retirement on Friday, ending a controversial 13-year reign at the head of the world's largest software company and sending the company's shares up nearly 6 percent.

Ballmer, 57, took over from co-founder Bill Gates in January 2000, but his leadership was questioned throughout his tenure by Wall Street and Silicon Valley, as Microsoft's stock price floundered and the company that drove the personal computer revolution was overtaken by Apple Inc and Google Inc in the shift toward mobile computing.

Ballmer's planned exit comes shortly after activist investing fund ValueAct Capital Management LP took a small stake in the company, and started agitating for a change in strategy and a clear CEO succession plan.

There are no obvious candidates to succeed Ballmer at the company that has only had two CEOs in its 38-year history. Many promising executives have left or were pushed out by Ballmer.

Ballmer is to retire within the next 12 months, once a special committee has selected a new CEO.

Although he has faced criticism for some time, his decision to retire surprised analysts.

"Yes, this was a surprise, especially considering how close it is to the recently announced strategic overhaul towards devices and services," said Sid Parakh, an analyst at McAdams Wright Ragen.

Only last month Ballmer launched a massive reorganization to reshape Microsoft into a company focused on devices and services, essentially mimicking Apple. Most industry watchers felt it was too little, too late in the effort to restore Microsoft as a technology leader.

"Since he took over in 2000, it is fair to say he missed a number of transitions: mobile, tablets, cloud," said Zeus Kerravala, an analyst at ZK Research. "Microsoft continues to live off traditional PC computing. Ballmer's strength is traditional PC computing. He was a great guy for his era but times have changed and a new leadership is needed. It's hard to say his tenure has been a success."

Ballmer has tripled Microsoft's revenues and more than doubled its already-large profits since he became CEO, but its share price has essentially stayed flat over the last decade, and never came close to the split-adjusted high of $59.97 (£38.50) it reached in late 1999, before the tech stock bubble burst.

Microsoft shares rose 5.7 percent to $34.26 on Nasdaq on Friday.

SURPRISE TIMING

Ballmer himself acknowledged his decision was abrupt.

"There is never a perfect time for this type of transition, but now is the right time," he wrote in a memo to employees. "This is an emotional and difficult thing for me to do. I take this step in the best interests of the company I love."

Ballmer said in a statement he had originally considered retiring in the middle of the reorganization, but eventually decided "we need a CEO who will be here longer term for this new direction."

The committee to select a new CEO is to be chaired by John Thompson, the board's lead independent director, and includes Microsoft co-founder and Chairman Bill Gates, as well as other board members Chuck Noski and Steve Luczo.

It will consider both external and internal candidates and work with executive recruiting firm Heidrick & Struggles International Inc, according to Microsoft.

(Editing by Jeffrey Benkoe and Lisa Von Ahn)

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