Microsoft CEO Steve Ballmer plans to retire from the software giant within the next 12 months.
The company said in a statement that Ballmer would leave once a replacement had been found.
Microsoft last month announced a major restructuring, to focus on functions and engineering rather than product lines.
the company had come in for criticism from stockholders for failing to make a success of its mobility strategy, with Microsoft's Surface tablet devices failing to capture significant market share.
In pre-market trading, Microsoft shares were up 8%.
In a letter to Microsoft employees, Ballmer said: "There is never a perfect time for this type of transition, but now is the right time. My original thoughts on timing would have had my retirement happen in the middle of our transformation to a devices and services company focused on empowering customers in the activities they value most. We need a CEO who will be here longer term for this new direction."
The Microsoft board of directors has appointed a special committee to find a replacement for Ballmer, which includes chairman and company founder Bill Gates. John Thompson, the lead independent director of the board, and head of the committee, commented: "The board is committed to the effective transformation of Microsoft to a successful devices and services company," Thompson said. "As this work continues, we are focused on selecting a new CEO to work with the company's senior leadership team to chart the company's course and execute on it in a highly competitive industry.
"As a member of the succession planning committee, I'll work closely with the other members of the board to identify a great new CEO," said Gates. "We're fortunate to have Steve in his role until the new CEO assumes these duties."