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Report: Microsoft Trims List of Possible CEO Candidates

Microsoft's search for its next chief executive officer is down to a select few candidates, according to a Reuters report published Tuesday.

The company has narrowed its list of possible replacements for outgoing CEO Steve Ballmer from 40 to roughly five external candidates and at least three internal candidates, according to Reuters, citing unnamed sources close to the matter.

Among those still in the running are Ford CEO Alan Mulally and former Nokia CEO Stephen Elop. The internal candidates include Satya Nadella, executive vice president for Microsoft's Cloud and Enterprise Group; and Tony Bates, the former CEO of Skype who is now executive vice president of Microsoft's Business Development and Evangelism group.

The other remaining candidates weren't noted, though the Reuters report pointed to Computer Sciences Corp. CEO Mike Lawrie as a favored pick by Wall Street.

Clockwise from top-left: Alan Mulally, Satya Nadella, Stephen Elop and Tony Bates.

The search could still take several months, according to Reuters. However, Nomura Securities' Rick Sherlund, a prominent analyst and longtime Microsoft watcher, told CNBC's Jim Kramer on Wednesday that he believes the new CEO will be named next month -- and that it will be Ford's Mulally. Reports that Mulally is the preferred candidate surfaced in late September.

Sherlund also said Ballmer may be considering a clean break from Microsoft once he steps down as CEO. Sherlund believes Ballmer will make a quick exit and Microsoft will purchase back his shares, valued at $12 billion. Sherlund said Ballmer will opt to exit the board because he "doesn't want to be second-guessed."

To compensate for Mulally's lack of experience running a tech company, Sherlund believes Microsoft Founder and Chairman Bill Gates will contribute in terms of directing product strategy. "Bill Gates is going to have to roll up his sleeves to complement Mulally," Sherlund told Kramer.

A new CEO would be wise to sell or spin off Microsoft's Bing and Xbox businesses, which are huge drains on profits, Sherlund said. Kramer added that the new CEO will have to "blow the company up."

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About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.

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