Microsoft announced Friday that chief executive Steve Ballmer planned to give up his post within the next 12 months, driving shares of the software giant up 8 per cent in pre-market trading.
The Redmond, Washington-based company said that Ballmer will leave the company once the board of directors chooses a successor.
"There is never a perfect time for this type of transition, but now is the right time," Ballmer said in a statement.
"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."
The 57-year-old has been with Microsoft since 1980, when he was the first business manager of the then-five-year-old company.
He took over the helm at the company, best known for the Windows operating system and Office productivity software, when founder Bill Gates stepped down in 2000.
Ballmer has drawn criticism from analysts in the last few years for failing to gain a toehold in the booming market for tablet computers and smartphones, which is now dominated by rivals Apple and Google.
Microsoft pioneered tablet computing a decade ago, but its tablet-friendly Windows 8 operating system, released last year, has been seen as a disappointment that confused many users.
Microsoft Windows 8-based tablet computers have around 4 per cent of the market, compared to 62 per cent for Google's Android operating system and 32 per cent for Apple's iOS.
In contrast, the company's Windows Phone operating system for smartphones has earned strong marks from users, but is also a distant third place behind Google and Apple in many markets.
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