Microsoft says CEO Ballmer to retire in 12 months

NEW YORK Microsoft (MSFT) says CEO Steve Ballmer will retire within the next 12 months.

Microsoft CEO Steve Ballmer, who took over the helm of the world's largest software company from founder Bill Gates, will retire within the next 12 months.

Microsoft Corp. did not name a successor. The company said it is forming a search committee and Ballmer will stay on until a replacement is found.

Microsoft shares surged more than 7 percent in early trading following the news.

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Ballmer, 57, met Microsoft founder Bill Gates in 1973 while they were living down a dormitory hall from each other at Harvard University. He joined Microsoft in 1980 to bring some business discipline and salesmanship to a company that had just landed a contract to supply an operating system for a personal computer that IBM would release in 1981.

Ballmer, a zealous executive prone to arm-waving and hollering, did the job so well that he would become Gates' sounding board and succeed him as CEO in 2000.

"It's a tad surprising, but every other business head has been rotated out," said BGC Financial analyst Colin Gillis. "They swapped out all their segment heads over the past few years. The only one they haven't changed is the CEO."

Though investors cheered the news on Friday, Gillis cautioned that it could be a "tough 12 months" for the company.

The obvious successor -- former Windows head Steven Sinofsky -- got booted by Ballmer, he said.

Sinofsky left the company shortly after the launch of Windows 8 last year. Indeed, as Microsoft stock lagged the broader market, Ballmer has been much criticized, with one former executive claiming Ballmer would get rid of any talented managers whom he considered a threat to his own position.

In a release, Ballmer said the timing is right for a search to begin.

"There is never a perfect time for this type of transition, but now is the right time," Ballmer said in a release. "We have embarked on a new strategy with a new organization and we have an amazing Senior Leadership Team. My original thoughts on timing would have had my retirement happen in the middle of our company's transformation to a devices and services company. We need a CEO who will be here longer term for this new direction."