Nadella has to figure out just how Microsoft will handle itself as a new dealer in phones, tablets and hybrid phablets. The Microsoft's Windows Phone 8 sales already lag far behind those of both Android and Apple phones, with Apple dominating the high end.
Meanwhile, the company is in the midst of reinventing itself as a purveyor of devices and services that rely on its cloud infrastructure to tie together phones, tablets, laptops, and gaming and entertainment hardware. It is working toward a better alignment of its operating systems so developers can reuse more code when they write apps for them. It is trying to embrace new Windows user interfaces such as touch and gestures without alienating customers familiar with the traditional Windows desktop. It is struggling to gain acceptance for its Surface devices - a blend of tablet and laptop that tries to outdo the iPad.
These forays into selling hardware has strained relations with the OEM partners who have sustained Microsoft by licensing the software that runs on the hardware they build. This comes at a time when sales of traditional PCs are faltering, giving the OEMs less incentive to cater to Microsoft. Nadella has some diplomatic work ahead.
But he seems prepared to face the challenges with optimism and an eye toward innovation.
"There is no such thing as traditional because I think that this business of ours doesn't respect tradition," he said in an interview at the Le Web 2013 conference in December. "What it respects is whether you're relevant and innovating in the future. ... And as I said if you don't have a real stake in the new then just surviving on the old - even if it is about [improving] efficiency - I don't think is a long-term game."
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