Microsoft wants to replace outgoing CEO Steve Ballmer before the end of 2013 as the software company's board of directors draws up a shortlist of candidates.

Steve Ballmer

Currently conducting preliminary interviews, the company has already spoken with Ford CEO Alan Mulally, former Nokia CEO Stephen Elop - who will rejoin Microsoft following the completion of its acquisition of Nokia's phone-making business early next year; former Microsoft executive Paul Maritz, and the company's business development chief Tony Bates.

This information comes from sources speaking to Bloomberg "with knowledge of the discussions." The sources also revealed that candidates who declined an offer of consideration include eBay chief executive John Donahoe.

The Microsoft board is also said to have solicited advice from former Cisco Systems executive Charles Giancarlo, who is now a managing director at private-equity firm Silver Lake, which is in the process of buying out Dell with company founder Michael Dell.

The sources said Microsoft is working to replace Ballmer - who announced in August he would retire within the next 12 months - before the end of 2013, but the precise timing will depend on negotiations over pay and, if hired externally, departure from their current company.

This would tally with reports last month which suggested investors were urgng the board to have a new CEO in place before the end of the year.

Hit the ground running

Whoever replaces Ballmer will need to hit the ground running, as the outgoing CEO has worked hard to transform Microsoft from a software company to a device manufacture and service provider. Ballmer has already made major changes with the introduction of Windows 8, Windows Phone 8 and the Surface tablet range, but these are still ongoing.

The next CEO will need to pick up the slack immediately, especially given Microsoft's acquisition of Nokia's phone-making business, which is due to be completed in early 2014, when Microsoft hopes the company's third ever CEO will be in position.

A first public appearance by the new CEO could be at the CES in Las Vegas in January, the biggest technology trade show in the world. Microsoft was for years a mainstay of the annual conference with Bill Gates and then Ballmer delivering keynotes in Las Vegas. Last year however the company decided not to attend the show, but according to CEA, the body which operates the show, Microsoft will be back this year, possilby with a new CEO in tow.

Turbulence

Microsoft will no doubt encounter turbulence over the coming months, increased by a report in early October claiming major investors in the software giant are looking to oust company founder and former CEO Gates from his role as chairman.

Claiming Gates' influence in the company's future is greater than it should be, given his 4.5% stake, three investors with a collective 5% share believe Gates' influence in decision-making could block the adoption of new strategies and would limit the power of the next CEO to make major changes.

Todd Lowenstein, a portfolio manager at HighMark Capital management, which owns Microsoft shares, said of the departure of Gates: "This is long overdue. Replacing the old guard with some fresh eyes can provide the oxygen needed to properly evaluate their corporate strategy."

But not everyone agrees. Fort Pitt Capital group senior analyst Kim Caughey Forrest suggested that Gates could play an even larger role as the company reinvents itself.

"The company has been missing a technology visionary," said Forrest. "Bill would fit the bill."

Bill Gates Microsoft