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UPDATE: Microsoft has confirmed that it will lay off around 9,000 employees, primarily impacting its gaming division, including the Xbox business. This decision is part of a broader strategy aimed at streamlining operations and focusing on areas deemed most promising for future growth. Reports suggest that these layoffs will also lead to the cancellation of several high-profile gaming projects, affecting studios like Rare and The Initiative.
Details on the layoffs and project cancellations
These recent layoffs follow Microsoft’s announcement back in May, where they stated plans to reduce their workforce by 3%, equating to nearly 7,000 jobs. This latest round seems to be part of an ongoing trend, following a significant cut earlier in 2023 that saw 10,000 jobs eliminated. Sources indicate that around 200 positions have been cut at social game developer King as well.
In addition to these layoffs, Microsoft has also canceled several projects, including Rare’s Everwild and a reboot of Perfect Dark. The closure of The Initiative, the studio behind Perfect Dark, underscores the challenges facing the gaming sector. Reports of layoffs have also emerged from other studios, like Blizzard and Turn 10, suggesting a wider impact across the industry.
Financial performance and strategic shifts
Despite the layoffs, Microsoft maintains that it’s in a robust financial position. CEO Satya Nadella recently highlighted a record performance in the company’s 2024 annual report, boasting over $245 billion in revenue—a 16% increase from the previous year. This raises an eyebrow regarding the necessity of these layoffs, especially when the company seems to be thriving financially.
Phil Spencer, head of Xbox, acknowledged the difficult nature of these layoffs but stressed that Microsoft remains committed to investing in promising areas. In a memo to employees, he noted, “We must make choices now for continued success in future years… This focused approach means we can deliver exceptional games and experiences for players for generations to come.” This suggests a strategic pivot towards capitalizing on the most lucrative opportunities in the gaming sector.
Future implications and company priorities
The timing of these layoffs coincides with Microsoft’s heavy investments in AI technology, marking a clear shift in corporate priorities. Nadella’s emphasis on an “AI platform shift” indicates that the company is redirecting resources towards AI development, which may explain the cuts in other areas. Analysts are now questioning whether this approach is sustainable, particularly when it involves parting ways with employees who contribute to products that are still in demand.
A Microsoft spokesperson confirmed that these layoffs represent less than 4% of the total workforce, stressing that while the gaming division is affected, it does not account for the majority of job cuts. The spokesperson stated, “We continue to implement organizational and workforce changes that are necessary to position the company and teams for success in a dynamic marketplace.”