Microsoft is eliminating 4,800 jobs across the company, including 3,200 positions in its Xbox gaming division, as the technology giant restructures its gaming business in response to weak financial performance.
The layoffs represent about 2.1% of Microsoft’s global workforce. Xbox CEO Asha Sharma said the first wave includes 1,600 employees and is part of a broader effort to streamline operations and improve profitability.
In a message to employees, Sharma said the gaming division has struggled to keep pace with competitors, noting that Microsoft has been losing money on its gaming investments. She said the business has generated substantially lower profit margins than comparable gaming platform and publishing companies and has lost 64 cents for every dollar invested.
As part of the restructuring, Microsoft will move four game development studios — Ninja Theory, Undead Labs, Compulsion Games and Double Fine Productions — to outside management. The company is also seeking to sell or spin off France-based Arkane Studios.
Sharma, who became head of Xbox in February, said Microsoft entered the current console generation with fewer users and higher operating costs than rivals Sony and Nintendo. The company also invested heavily in expanding its Game Pass subscription service and releasing first-party games on competing platforms, but those strategies have not delivered the expected returns.
The executive also said the Xbox organization has become overly complex, with some projects passing through as many as 14 layers of management. Microsoft plans to reduce that number to five layers or fewer where possible.
The cuts come as the video game industry continues to grapple with rising hardware costs driven by higher memory and storage prices. Microsoft, Sony and Nintendo have all increased console prices in recent months to offset higher production expenses.
Microsoft also sought to reassure employees that artificial intelligence was not the reason for the layoffs. In a separate message, Chief People Officer Amy Coleman said none of the eliminated positions would be replaced by AI, though she acknowledged the technology is changing how work is performed and how the company serves customers.
Source: Yahoo!Finance