The world’s largest software maker announced on Friday that Chief Executive, Steven Ballmer, will retire in the next 12 months.
Ballmer will continue as acting CEO and will lead the company until a successor is chosen by the board.
Microsoft shares surged 9 percent in premarket trading on the news.
“We need a CEO who will be here longer term for this new direction,” Ballmer said in an official statement on the company’s website.
“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,” he said.
Ballmer served as CEO for over a decade, but has struggled to lead the company’s transition in tablets and mobile devices.
Profits have missed analysts’ forecasts, as demand for Windows-operated PCs drops, and the tablet market dominates sales.
Under Ballmer, Microsoft was forced to cut the price of its Surface RT tablet by nearly 30 percent, as the device failed to glean market share from tablet veterans such Apple and Samsung.
Bill Gates said Microsoft is “fortunate to have Steve in his role until the new CEO assumes these duties.”
Rumors have circulated tech blogs that founder Gates, who currently acts as board Chairman, may return as operational CEO.
The Nasdaq-listed Microsoft Corp is a leader in business software, and champion of Windows operating system.