UPDATE 2-Microsoft considers Ericsson CEO for top job - report
* Swede Hans Vestberg would be surprise choice
* Ericsson shares have underperformed sector
* List of potential candidates is thin -sources
By Edwin Chan and Sven Nordenstam
SAN FRANCISCO/STOCKHOLM, Jan 15 (Reuters) - Microsoft Corp is considering Ericsson Chief Executive Hans Vestberg as a possible successor to outgoing CEO Steve Ballmer, Bloomberg reported, citing sources briefed on the software giant's executive search.
The dynamic 48-year-old Swede fits the bill as a media-savvy technology fanatic, but his emergence as a leading candidate for the U.S. company will still come as a surprise to many on Wall Street.
Vestberg, a former elite-level handball player, worked his way through the ranks at the world's largest mobile telecoms equipment maker, with stints in China, Brazil, Mexico and the United States en route to becoming chief financial officer before taking the top job in 2010.
But he has struggled to convince investors that Ericsson can maintain its lead in mobile networks in the face of stiff competition from rivals such as China's Huawei.
Since Vestberg took the helm, the company's shares have underperformed the sector. Though the share price has risen 19 percent, in line with Microsoft, that compares with a leap of nearly 60 percent for the Stoxx Europe 600 Technology Index over the same period and a 41 percent rise for Sweden's blue-chip index.
Both Microsoft and Ericsson declined to comment on Bloomberg's report, though a source close to the U.S. company has said that no CEO appointment is likely until the last week of January at the earliest.
Furthermore, Microsoft might prefer a candidate with more experience in consumer products as it tries to take the fight to market leaders Apple and Samsung in handsets and tablets after its purchase of Nokia's mobile phone business.
Vestberg was in charge of Ericsson's exit from its handset joint venture with Sony two years ago, ending the company's association with consumer products.
"I don't think it's very likely that they will choose Vestberg," said Bengt Nordstrom, head of Swedish telecoms consultancy Northstream.
"It's more logical that they will find a U.S. leader, from their network of owners, board members and experienced CEOs with a software, enterprise and media background. There's enough with talent and experience in the U.S. market."
Since Microsoft's Ballmer announced his retirement plans last August, analysts have discussed potential candidates ranging from company insiders Satya Nadella and Tony Bates to several outsiders.
But speculation refocused on internal choices this month after the leading external candidate, Ford Motor Co CEO Alan Mulally, took himself off the list.
Sources familiar with the company have told Reuters that, with Mulally out of the running, the list of candidates able to run a globe-spanning software corporation struggling to expand into the mobile software and devices markets is thin.
Analysts say that Microsoft may have to look at "dark horse" candidates, but noted that some widely touted executives in the technology sector, including Pivotal Inc CEO Paul Maritz, have already declined to take the job.
In a blog post on Microsoft's website last month lead independent director John Thompson, who is spearheading the search, emphasised the need for a CEO with good technology credentials and "an ability to lead a highly technical organisation and work with top technical talent".