Tech giant Microsoft said on Monday that it will cut 4,800 jobs which is around 2.1 per cent of its global workforce, to renovate its Xbox gaming business and divesting up to five studios as it looks to boost returns after years of heavy investment in the division.
The restructuring of its gaming division will involve 3,200 job cuts, including laying off 1,600 employees on Monday.
Despite spending tens of billions of dollars to expand Xbox, including its blockbuster acquisition of Activision Blizzard, Microsoft has struggled to narrow the gap with Sony’s PlayStation, and Nintendo, prompting a broader rethink of the gaming business.
The company has increasingly shifted its strategy toward distributing its games across more platforms rather than relying on console-exclusive titles to drive Xbox hardware sales.
The Xbox restructuring will involve divestment of four studios, Xbox’s new head, Asha Sharma, said in a note to employees.
‘South of Midnight’ producer Compulsion Games and ‘Psychonauts’ maker Double Fine Productions will become independent studios, while Ninja Theory and Undead Labs will be spun off to grow ‘Senua’ and ‘State of Decay 3’, Sharma said.
The management of Arkane Studios, which developed ‘Dishonored’ and is currently working on a game based on Marvel Comics character Blade, has started consultations with its workers union in France to review options, she added.
Big Tech’s historic AI outlays, set to top $700 billion this year, are piling pressure on companies to show returns from the technology and offset the rising cost of rolling it out across their businesses. Amazon (AMZN.O), opens new tab and Meta Platforms (META.O), opens new tab have also laid off thousands of employees this year.
Chief People Officer Amy Coleman, however, told employees in a memo that “the roles eliminated today are not being replaced by AI.”
“At the same time, what is true is that AI is changing how work gets done.”
“That (targeted cuts) makes the announcement read more like portfolio reallocation and operating discipline than a fresh catalyst for the stock,” said Parth Talsania, CEO of Equisights Research.
“In the near term, the market is likely to reward Microsoft less for headcount reductions and more for evidence that AI monetization is scaling faster than AI-related costs.”
