What you need to know
- Microsoft CEO Satya Nadella says the company's supply chain is "getting back on rails."
- Nadella's comments come after China took steps to shut down manufacturing plants in response to the coronavirus (COVID-19) pandemic earlier this year.
- While the supply side is starting to recover, Nadella said he's concerned that demand may be hit as the pandemic continues.
Though the coronavirus (COVID-19) pandemic continues to spread around the globe, its slow in Asia is having positive effects on Microsoft's hardware supply chain. In an interview with CNBC this week, Microsoft CEO Satya Nadella said the company's supply side is recovering, but it's the demand side where there's particular concern.
"On the supply side we are getting back on rails," Nadella told CNBC. That could prove to be a good omen for a year in which Microsoft has several high-profile devices scheduled to launch, like the Xbox Series X, Surface Duo, and Surface Neo.
"We have a great balance sheet, we are a very diverse business, we have a mix of annuity, non-annuity, that is also stronger than even the last time we even went into the financial crisis," Nadella said. "I feel confident we'll come out of this, frankly, pretty strong."
However, Nadella said he's concerned with whether hardware demand will continue in the U.S. and Europe, where social distancing measures and mandatory store closures continue, and worker layoffs mean less money to spend. Even Amazon is feeling the effects of the pandemic. While struggling to keep up with demand, the company suspended shipments of anything other than medical supplies, household staples, and high-demand products to its warehouses.
On the software and cloud infrastucture side of things, Nadella said Microsoft has seen a surge in demand as more people are working from home. "If this was a previous generation of data center architectures or software architectures, I don't think we would have been able to deal with this crisis as effectively as we have been able to," he said. Microsoft recently announced Teams, its work and education collaboration tool, surged to 44 million daily users — a spike from 20 million daily users in November.
The interview follows an email Nadella sent to employees last week, in which he laid out Microsoft's response to the COVID-19 pandemic. The company made Teams premium features free for six months, ensured its hourly employees continue to be paid for their normal hours, and is assisting in attempts to map the immune system's response to COVID-19. It's also working with other industry giants to fight misinformation about the virus online.
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