Barcelona (CNN Business) Satya Nadella has defended Microsoft's $479 million contract to supply augmented reality systems to the US military that has been criticized by some of his colleagues.

The CEO said Monday that while he would continue to engage with employees and consider Microsoft's role as a corporate citizen, the company would not "withhold technology" from democratic governments.

"We made a principled decision that we're not going to withhold technology from institutions that we have elected in democracies to protect the freedoms we enjoy," he told CNN Business at Mobile World Congress.

"We were very transparent about that decision and we'll continue to have that dialogue [with employees]," he added during the exclusive interview.

Microsoft MSFT was awarded the contract to supply "Integrated Visual Augmentation System" prototypes to the US military in November. The company could eventually deliver over 100,000 headsets under the contract.

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