If Microsoft CEO nod goes to Nadella, get to know Amy Hood

The ostensible catalyst for the bump in share price was the latest rumor pointing to Satya Nadella's likely appointment as the next Microsoft chief executive. The relief rally also reflected the recognition that Chief Financial Officer Amy Hood is likely going to play a much larger role at the company -- and that's good news for any coming Microsoft transition. More about that in a moment.

With the big-money crowd nervously watching potential meltdowns in overseas markets and tapering at home, it's surprising to see a big thumbs-up from the financial community on the seeming choice of a super geek, no matter how talented. By itself, I doubt it would be enough to satisfy the activist shareholder ValueAct Capital, which now has a voice on the board.

As they make clear, ValueAct's MO is to press corporate management to increase shareholder value. In the next 12 months Microsoft will face enormous pressure to contain -- and even cut -- costs once the Nokia acquisition closes and the company finds itself with approximately 130,000 people on the payroll. ValueAct will throw a fit it feels there's any backsliding at a company it already deems to be undervalued due to management missteps.

That's where the scenario featuring a combination of a geek CEO and an empowered CFO with experience handling this sort of thing makes a lot of sense. Full disclosure: I've been an unabashed fan of Hood, one of the sharpest execs on Microsoft's roster. Hood left Goldman Sachs for Microsoft in 2002, where she worked in the server and tools business -- a stint where she had to collaborate closely with Nadella. Last May, she got the promotion to company CFO.

Although she hasn't publicly figured in the months-long drama of finding Microsoft a new boss, the scenario in which Nadella winds up being a successful pick will involve a much larger role for Hood. Here's Barclay Capital's Raimo Lenschow offering his take on the topic:

[W]e believe the most recent quarter demonstrated the effectiveness that Amy Hood, the new CFO, is having, particularly around cost control, realigning the business, and setting expectations. As such, we believe the combination of Mr. Nadella and Ms. Hood could be a recipe for successfully managing Microsoft's transition to a "devices & services" company and, ultimately, driving better shareholder value.

And here's a snippet from a similar opinion put from Nomura's long-time Microsoft watcher, Rick Sherlund:

We think new CFO Amy Hood is very operationally focused, very bright and capable of managing costs and taking steps along with Mr. Nadella to both fix the business and enhance shareholder value. We want them to be free to do so; it may just take longer than with one of the outside candidates to change the thinking of the Board in how they regard the creation of shareholder value.

This isn't just praise by one ex-Goldman Sachs alum for another. Sure, there's some of that. But it's easy to understand why insiders have long described Hood as an up-and-comer. She's well-respected both inside and outside the company for exceptionally strong presentation and analytical skills. What's more, Hood understands the financial community's language and knows how to communicate to those folks in a crisp, no-nonsense way that will be a big help when it comes time to make tough reorganization decisions.

Another plus: Given Microsoft's continuing emphasis on services and devices, it will be a big help for Nadella -- assuming that he's the guy -- to have by his side someone who played a major part in the implementation of a subscription-services model for Office 365.

Nadella is not a naïf. The man has distinguished himself in a variety of managerial roles at Microsoft over the last 22 years. And it's not just his technical depth: Nadella has all the geek bona fides that would reassure Bill Gates that the company is in good hands. I reported a couple of weeks ago that Gates was keen on bringing in someone with technical chops who could reprise the role of corporate visionary that he once filled.

What's new with the latest Bloomberg rumor is the scenario in which Gates would depart and John Thompson, who's leading the board's search committee, would become chairman as Nadella busies himself coming up with a new vision for Microsoft. Even if it's not immediate, Gates' departure is virtually preordained.

All the more reason why the company's success depends on a fruitful collaboration between two Microsofters as they inevitably turn to cost-cutting and to refocusing the business. For now, both are relatively unknown to the wider public. If the rumor mill is right, that's about to change.