Mar 22, 2020 - Technology

Microsoft CEO focused on "new demand" caused by coronavirus

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."

Go deeper

Microsoft Teams usage up in areas with social distancing measures

Photo: Kena Betancur/VIEWpress/Corbis via Getty Images

Microsoft says it has seen some significant spikes in some applications where there are shelter-in-place or social distancing rules.

Why it matters: The increased cloud demand adds to the strain on the internet, but companies whose key apps are in the cloud are far more easily able to accommodate a remote workforce than those that rely on their own servers.

Microsoft Teams adding new features as demand increases

An example of the pop-out chat window option coming to Microsoft Teams. Photo: Microsoft

With the coronavirus pandemic putting increased attention on collaboration software, Microsoft is announcing a host of new features coming to its Teams product this year.

Why it matters: Microsoft sees Teams, which turns three years old this week, as a key growth product for the company. The product now has 44 million daily active users, up from 32 million a little over a week ago.

Coronavirus dents tech's supply chain

Illustration: Sarah Grillo/Axios

The novel coronavirus has just begun to shut down offices and public gatherings across the U.S., but its impact on hardware and components production in China started weeks ago, and the flow of goods out of China's factories has been slow to recover.

Why it matters: The global tech economy's just-in-time supply chain has never faced a disruption quite like this one. And while many observers are guardedly optimistic, no one knows for sure yet how this crisis will play out or what sorts of shortages the industry might still face.