Microsoft CEO Satya Nadella told "Axios on HBO" that he is not focused on cutting costs in the face of the coronavirus crisis, but instead aiming to meet "new demand" for Microsoft Teams and other Office applications as more employees work from home.

Why it matters: Tech companies like Microsoft are taking on central new roles in keeping government, business and education up and running as offices shut down to reduce the spread of the coronavirus.

What's happening: Microsoft warned in February that earnings would fall short of expectations due to the virus, but that related to the supply of PCs coming out of China, not the broader impact of the pandemic.

  • Asked if he was contemplating layoffs or slowing in investments in certain areas, Nadella said that's not where he is putting his energy.
  • "So for now, what I'm focused on is ... what I would call new demand," Nadella said. "I don't think, you know, one month ago I would have thought of 'work from home' as a complete new scenario with the type of spikes we have today. Overall activation of Microsoft 365 is increasing significantly." (That's a mix of new paid users and free trials, though.)

While the spike in demand has led to some challenges — Microsoft Teams had an outage in Europe last week — Nadella said that, overall, the shift from company-based servers to the cloud has prepared the economy to handle a large population of employees working from home.

"I think we are so much better equipped today," Nadella said. "But clearly the spikes we are seeing are pretty unprecedented, right? This was not a growth that we had looked at and planned in any spreadsheet or any model we had even a month ago."

Yes, but: It's not like a near shutdown of the economy isn't going to hurt other areas.

  • "When you have large swaths of our consumer economy quarantined, there will be an impact," Nadella said.
  • "We are clearly going to have some demand shock," Nadella said. "But Microsoft is a very diversified business, and that's been one of our strengths through the previous downturns. ... We have a good set of businesses with good business models."

The big picture: With a huge concentration of employees in Washington state — and a presence in China — Microsoft was hit early by the epidemic and acted early, encouraging its employees to work from home and promising to pay hourly workers even if their services were not needed as full-time employees telecommute.

Meanwhile: Nadella said he is still tapping Bill Gates' expertise, even as the Microsoft co-founder announced last week he would step down from the company's board.

  • "Bill has been very engaged in helping us understand even some of the core data and science and also the response side of it," Nadella said, adding, "Bill and his guidance will continue independent of his participation in our board. He will always be our founder, and he'll always be somebody that I'll count on his advice in times like this and beyond."

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Expand chart
Reproduced from The Leuthold Group; Chart: Axios Visuals

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