Microsoft: Nadella named CEO; Thompson named chairman

February 4, 2014, 7:30 PM UTC

FORTUNE — Microsoft (MSFT) on Tuesday named Satya Nadella as its next chief executive officer, ending an extended search for a new leader. He’s only the third CEO in the technology company’s 39-year history, and previously served as executive vice president of Microsoft’s Cloud and Enterprise group.

Steve Ballmer, who announced his intention to retire in August after 14 years on the job, will step down immediately. The company’s shares were up slightly in morning trading.

Microsoft also named John Thompson as chairman of the company’s board of directors, succeeding co-founder Bill Gates. Gates will become a “technology advisor,” the company said. He will “devote more time to the company,” it added.

MORE: Inside the Microsoft CEO search

In a memo to employees, Nadella wrote that Microsoft must thrive “in a mobile and cloud-first world.”

“I believe over the next decade computing will become even more ubiquitous and intelligence will become ambient,” he wrote. “The coevolution of software and new hardware form factors will intermediate and digitize — many of the things we do and experience in business, life and our world. This will be made possible by an ever-growing network of connected devices, incredible computing capacity from the cloud, insights from big data, and intelligence from machine learning.”

He added: “To paraphrase a quote from Oscar Wilde — we need to believe in the impossible and remove the improbable. This starts with clarity of purpose and sense of mission that will lead us to imagine the impossible and deliver it. We need to prioritize innovation that is centered on our core value of empowering users and organizations to ‘do more.'”

For more, don’t miss Fortune‘s exclusive exit interview with Steve Ballmer.