From a big-picture perspective, this is an incredibly boneheaded move. Microsoft has put a great deal of emphasis on "the cloud" in recent years, making it a major part of their business strategy, yet they are now sending a clear signal that their cloud offerings can't be trusted.
For that reason, I doubt that Nadella made this decision personally. This looks like the kind of thing that was probably done at the middle-management level. We know that Microsoft's internal corporate structure is highly siloed, with divisions often refusing to cooperate and even trying to sabotage one another. Probably the grand poobah of cloud services was upset that his quarterly bonus wasn't as high as he wanted, so he ordered his underlings to find any possible way to cut costs and boost profits, and this is what they came up with. I wouldn't be all that surprised to see Nadella have to walk this back in a couple days due to the backlash.