Microsoft has begun a new phase of internal restructuring with a broad round of layoffs affecting various areas of the company. The move will affect 4,800 employees, a figure equivalent to about 2.1% of its global workforce, although a significant portion of the impact will fall on the Xbox video game business.
The decision comes at a time when the interactive entertainment market is facing increasingly fierce competition, as console manufacturers seek ways to maintain their market share against rivals such as PlayStation and Nintendo.
Microsoft prepares more changes for Xbox
Of the announced layoffs, 1,600 are at Xbox. However, the company indicated that the restructuring will continue during the current fiscal year with an additional 1,600 layoffs. At the same time, Microsoft will spin off four development studios that it had acquired in previous deals.
Asha Sharma, head of the video game division, explained that the sector is facing difficulties related to the rising cost of the components needed to manufacture consoles, a situation that has complicated the growth of the hardware business.
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The reorganization also comes on the heels of the $69 billion acquisition of Activision Blizzard, a move through which Microsoft sought to expand its portfolio of franchises and strengthen its focus on video game subscription services. However, that strategy has not enabled Xbox to pull ahead of its main competitors.
The cuts are part of a broader corporate restructuring. Amy Coleman, Microsoft’s chief people officer, attributed these decisions to changes in customer needs. Additionally, the company had already offered voluntary separation programs to 8,750 employees last May, an initiative accepted by more than 30% of eligible employees.
