After showing some signs of life last year, Microsoft Corp. (Nasdaq: MSFT) stock could get another boost in 2014 when a new CEO takes the helm - and the job could be going to a company insider.

According to a recent Bloomberg report, enterprise and cloud chief Satya Nadella has emerged as the front-runner to replace Steve Ballmer as the next Microsoft CEO, moving past former Skype CEO Tony Bates and former Nokia head Stephen Elop.

If Nadella, 46, is indeed named the next Microsoft CEO, he will face numerous challenges right out of the gate.

Despite its success, Microsoft continues to rely heavily on the profits of its two flagship products, Windows and Office. The company is still trying to catch up on the mobile revolution of smartphones and tablets that has eaten into sales of traditional PCs and the Microsoft software that runs on them.

That miscue caused Microsoft stock to languish for more than a decade, although MSFT did rise 40% in 2013, as a midyear reorganization and Ballmer's announced departure gave investors hope.

In addition to the news on Nadella, Bloomberg also said Bill Gates will step down as Chairman of the Board to devote himself full time to philanthropic activities, which also could have a major impact on Microsoft, depending on how his role changes.

Here's why Nadella as the next Microsoft CEO - as well as the departure of Ballmer and Gates - could be positive for Microsoft stock.

Right now, Satya Nadella is the president of Microsoft's server and tools division.

An Indian-born engineer with degrees in electronics and computer science, he graduated with an M.B.A. from the University of Chicago Booth School of Business and began working at Microsoft in 1992. Over the last 22 years, he's held leadership roles in cloud services, Internet search, server software, and Windows business applications.

Nadella has successfully launched a number of projects within Microsoft, including BizTalk, Microsoft's Commerce Server, and Microsoft's Office Small Business products.

But his chief achievements have come as a leader of recent online projects. He was responsible for transforming a failing Windows Live Search product into the search engine Bing, which has been growing market share in the struggle against the mighty Google Inc. (Nasdaq: GOOG).

It's true that Nadella lacks experience as a chief executive, unlike Bates or Ford's Alan Mullaly, and has little experience with the company's consumer products such as the smartphone, personal computer, and gaming lines.

But there are several ways Nadella has an edge as the next Microsoft CEO as the company transitions from the Ballmer years...

Ballmer's strategy of evolving Microsoft from a software company to a devices and services firm will rely heavily on greater adoption of cloud computing - Nadella's core area of knowledge.

And while Nadella may lack a complete understanding of all of the firm's business lines, he does have a nose for profitability.

His most recent success came in the company's booming server business, which was restructured under Ballmer's new strategy in July 2013 to focus on cloud and enterprise software. In the last fiscal year Nadella boosted revenue to $20.3 billion from $16.6 billion in 2011, which was when he assumed control of the division.

Another Nadella strength is his relationship with the engineering corps of Microsoft.

"Microsoft is a contentious enough place that you wouldn't want to bring in someone who lacked credibility with the engineers," MIT Sloan School of Management professor Michael Cusumono told Bloomberg.

As we noted when Mullaly was a name being thrown around, Microsoft desperately needs a cultural transition. Then we said Microsoft needed a turnaround expert capable of changing the culture and focusing on business development, or a technology visionary capable of leading the firm in a rapidly changing world.

Nadella, with his strong internal relationships, should be exceptionally qualified to execute such a change in the corporate culture.

The company is expected to make its final decision on the CEO appointment sometime in the first quarter, but the sooner the better for Microsoft stock. Ballmer's lame duck status is holding the company back at this point.

And putting an insider like Nadella in the CEO job would probably mean replacing Gates on the Microsoft board with an outsider - most likely former International Business Machines Corp. (NYSE: IBM) executive John Thompson, who has asked a lot of tough questions since joining Microsoft's board in 2012.

"If they are going for the CEO who is right down the hall from Steve Ballmer, you've got to give investors a bone," Daniel Ives, an analyst at FBR Capital Markets, told Bloomberg. "It would obviously be a big change and a historic change but it's obvious Microsoft needs change in terms of strategy in terms of the next leg of growth."

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