Microsoft CEO Steve Ballmer announced Friday that he will retire within the next 12 months.
Shares of Microsoft soared 9 percent in premarket trading on the news.
"There is never a perfect time for this type of transition, but now is the right time," Ballmer said. "We have embarked on a new strategy with a new organization and we have an amazing senior leadership team."
Microsoft unveiled its latest reorganization a month ago, hoping to better align the company's organizational structure with its new corporate strategy. Ballmer said the transition to a "devices and services" company, focusing on making hardware, online services and apps that work together seamlessly across multiple screens and gadgets.
Ballmer said he originally had planned to retire in the middle of the company's latest transition plan, but he felt the company needed a longer-term CEO who would be able to see Microsoft through its restructuring.
Bill Gates, Microsoft's founder and chairman, will be involved in the hiring process.
"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."
Investors have been critical of Ballmer for failing to anticipate the mobile computing revolution. Microsoft trails Apple and Google in the world of mobile software and devices. And despite a search partnership with Yahoo, Microsoft still has been unable to generate profits from its online division under Ballmer.