Microsoft Implements Major Layoffs Targeting Xbox and Other Divisions

Yesterday, Microsoft announced its own workforce reduction on a historic scale. Combined, they have shed about 6,000 employees, almost 3% of their worldwide workforces. This decision represents the deepest cuts the company has made in more than two years. The layoffs started this past May and have since expanded to include many of the company’s…

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Microsoft Implements Major Layoffs Targeting Xbox and Other Divisions

Yesterday, Microsoft announced its own workforce reduction on a historic scale. Combined, they have shed about 6,000 employees, almost 3% of their worldwide workforces. This decision represents the deepest cuts the company has made in more than two years. The layoffs started this past May and have since expanded to include many of the company’s divisions, including Xbox. The announcement went out on Wednesday.

Recent layoffs provide a tragically-timed example of Microsoft’s efforts to focus on core competencies. The company further plans to reduce management layers and focus on growth priorities. The company believes these changes will have it poised for long-term success in an ever-evolving technological environment.

Layoff Details and Impacts

The layoffs are especially deep in software engineering roles, underscoring the company’s transition to a more streamlined operational model. Microsoft has vowed to not disclose the specific number of layoffs. The firm announced that it has delivered on cutting its workforce by approximately 4% year-over-year, which would convert to over 9,000 staff.

In addition to the truckers, at least 830 workers who are based at Microsoft’s headquarters in Redmond, Washington are included in the cuts. This decision has raised fears about where the future programming workforce to do these tasks will come from. This is particularly the case given the company’s recent strides in generative artificial intelligence (AI) technology. As Microsoft’s own CEO, Satya Nadella, has said, AI is the “most transformative technology of our time.” He thinks it could automate “at most 20 to 30% of the code” that human programmers typically produce.

Focus on Strategic Growth Areas

Xbox CEO Phil Spencer addressed the implications of the layoffs for the video game division, stating that the cuts would help position Xbox “for enduring success and allow us to focus on strategic growth areas.” He further emphasized the need for Microsoft to “follow Microsoft’s lead in removing layers of management to increase agility and effectiveness.”

Analysts have talked about Microsoft’s big focus on AI and cloud technologies. This move is a sign of the company’s focus in saving money in more legacy areas such as Xbox. Dan Ives, an analyst at Wedbush Securities, commented on the company’s strategic shift: “They’re focused more and more on AI, cloud and next-generation Microsoft and really looking to cut costs around Xbox and some of the more legacy areas.”

Financial Implications of Layoffs

Microsoft relatively just launched its new fiscal year on Tuesday. The firm estimates costs from last month’s layoffs will total upwards of $80 billion just for last fiscal year. This monetary change is incredibly important. It wants to increase its overall operational effectiveness and market responsiveness of the company’s operations.

Despite having conducted at least three rounds of layoffs this year, Microsoft remains committed to its vision for growth and innovation. Forcing the reduction in workforce numbers is a deeply misguided attempt to keep companies competitive. This is extremely important in a market where research and development in AI and other cloud-based solutions are quickly flooding the market.

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