Microsoft is cutting 4,800 jobs, about 2.1% of its global workforce, with a significant number of positions eliminated at its Xbox video game business. The reductions include 1,600 Xbox workers, and further cuts are expected this year as part of a broader reorganisation aimed at resetting the gaming division amid intensifying competition.
Xbox CEO Warns of 'Hardware Crisis'
In a memo to staff, Xbox CEO Asha Sharma, who took over the gaming division earlier this year, stated: 'Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses.' Sharma highlighted that the industry, where Xbox competes with Sony's PlayStation and Nintendo's Switch, is facing a severe 'hardware crisis' as costs for console components soar.
Beyond the immediate cuts, Sharma indicated that Xbox expects another 1,600 job reductions over the course of the tax year. The company is also spinning off four video game development studios that were previously acquired by Microsoft.
Activision Blizzard Acquisition Not Enough
Nearly three years ago, Microsoft closed a £51.5 billion ($69 billion) deal to acquire gaming giant Activision Blizzard, the maker of Call of Duty and other blockbuster franchises. At the time, the company aimed to broaden its game development portfolio and launch a Netflix-like streaming subscription service. However, Sharma admitted: 'While those businesses have created meaningful value, they did not grow at the pace we expected.'
Broader Microsoft Cuts and Voluntary Buyouts
The Xbox cuts are part of wider Microsoft job reductions, which Chief People Officer Amy Coleman linked to unspecified changes in customer needs. In a blog post on Monday, Coleman wrote: 'I also want to be direct that the roles eliminated today are not being replaced by AI.' The cuts follow voluntary buyouts that Microsoft began offering to about 8,750 employees in May. Coleman noted that more than 30% of eligible workers accepted those voluntary retirement offers.
