Microsoft’s Xbox to cut 3,200 jobs, divest five studios in major overhaul
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[NEW YORK] Microsoft Corp’s Xbox plans to eliminate 3,200 jobs, or around 20 per cent of its staff over the next year, as part of a massive reorganisation to spur growth in the struggling gaming division. Xbox will also divest four of its video-game development studios and is beginning the process to part ways with a fifth.
“Our business today is not healthy,” chief executive officer Asha Sharma wrote in a note to staff Monday morning, adding that Xbox is operating at margins three to 10 times lower than comparable businesses. “We must reset Xbox.”
The goal is to streamline the business and reinvest in bigger projects, Sharma wrote. It’s the most significant move yet for Sharma, who became Xbox CEO in February, inheriting what she has described as a business in distress.
Despite making big investments, including the US$69 billion purchase of Activision Blizzard in 2023, Xbox has struggled to release hit games, seen hardware sales decline significantly and faced an increasingly tumultuous market.
Last month, Sharma wrote in a memo to employees that Xbox’s “accountability margin,” the metric Microsoft uses to reflect profit margin, had fallen to 3 per cent and that annual revenue had plummeted. “Going forward, this cannot continue,” she wrote then.
At Xbox, 1,600 jobs will be eliminated on Monday and the rest will be executed over the next 12 months, according to the letter. The reductions come amid another 3,200 layoffs at Microsoft outside of Xbox, largely among sales divisions. They are being fuelled by changes in how products are built and what customers want, chief people officer Amy Coleman wrote in a memo to staff seen by Bloomberg.
In all, planned cuts across the company announced Monday total 6,400. That amounts to less than 3 per cent of total headcount of about 228,000. BLOOMBERG
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