Microsoft has named Satya Nadella as its new CEO, the company announced early Tuesday.

Nadella, a longtime Microsoft executive, will replace Steve Ballmer, who announced in August that he would be stepping down from the company within the year. He will be just the third CEO in Microsoft's history, after Ballmer and cofounder Bill Gates. Gates, who had previously served as Microsoft's chairman, will move into an advisory role.

“Having worked with him for more than 20 years, I know that Satya is the right leader at the right time for Microsoft,” Ballmer said in a statement. “I’ve had the distinct privilege of working with the most talented employees and senior leadership team in the industry, and I know their passion and hunger for greatness will only grow stronger under Satya’s leadership.” 

Introducing our new CEO, Satya Nadella: http://t.co/u5IGl1N78G pic.twitter.com/akgNY5euEJ

— Microsoft (@Microsoft) February 4, 2014

Microsoft had been rumored to be considering a number of outside candidates, but ended up choosing a longtime insider. Gates was reportedly a strong advocate for Nadella being nominated. According to the Microsoft release, he will move into an advisory role, "supporting Nadella in shaping technology and product direction."

During more than 20 years at the company, Nadella has served in a number of executive roles at the company was most recently its VP of its Cloud and Enterprise business.

In an email to employees, Nadella said it was "very humbling" to be appointed to the chief executive role. "It reminds me of my very first day at Microsoft, 22 years ago. Like you, I had a choice about where to come to work," he wrote. "I came here because I believed Microsoft was the best company in the world... I knew there was no better company to join if I wanted to make a difference. This is the very same inspiration that continues to drive me today."

Microsoft has struggled to keep up with the changing consumer technology landscape in recent years, a fact that Nadella has hinted at in recent interviews and echoed in his email to employees.

"While we have seen great success, we are hungry to do more," he wrote. "Our industry does not respect tradition — it only respects innovation."

He added: "This is a critical time for the industry and for Microsoft. Make no mistake, we are headed for greater places — as technology evolves and we evolve with and ahead of it. Our job is to ensure that Microsoft thrives in a mobile and cloud-first world."

Microsoft stock was up by a little more than 1% in premarket trading following the news.