Microsoft Corp. appears to be embarking on another significant round of workforce reductions, with anticipated layoffs in the Xbox gaming unit, reported Bloomberg.
The moves come as the tech giant navigates a period of substantial investment in artificial intelligence (AI) and seeks to enhance profitability, particularly within its recently expanded gaming portfolio.
Xbox division faces continued cuts
The Xbox division is reportedly preparing for its fourth major layoff event within the last 18 months.
Bloomberg reported, citing sources, that managers within Xbox anticipate substantial cuts across the entire group.
This follows a series of three previous reductions in the past year and the closure of several subsidiary studios.
This ongoing pressure on Xbox stems, in part, from Microsoft’s considerable $69 billion acquisition of Activision Blizzard Inc., a deal that finalized in 2023.
Microsoft executives are reportedly keen to see a boost in profit margins from their expanded gaming operations, suggesting that the layoffs may be a measure to streamline costs and optimize efficiency within the division to meet these financial objectives.
The integration of such a large acquisition often leads to organizational overlaps and redundancies, which companies typically address through restructuring and, at times, workforce reductions.
Broader workforce reductions
Bloomberg earlier reported that Microsoft is planning broader job cuts, with a particular focus on its sales teams.
These reductions are anticipated to be announced early next month, following the conclusion of Microsoft’s fiscal year at the end of June.
While sales teams are expected to bear a significant brunt of these layoffs, the cuts are not expected to be exclusive to this department, and the precise timing remains subject to change.
These forthcoming terminations follow a previous round of layoffs in May that affected approximately 6,800 employees, primarily within product and engineering roles, while largely sparing customer-facing positions such as sales and marketing.
The current emphasis on sales aligns with earlier signals from the company.
In April, Microsoft informed employees of its intention to increasingly utilize third-party firms to handle sales of software to small and mid-size customers, potentially reducing the need for an internal sales force in certain segments.
Strategic investments and fiscal discipline
Microsoft’s ongoing workforce adjustments are contextualized by the company’s substantial investments in artificial intelligence.
The tech giant is committing tens of billions of dollars to build out servers and data centers essential for its burgeoning AI initiatives.
Alongside these significant expenditures, Microsoft executives have reportedly assured Wall Street and cautioned employees about the need to maintain fiscal discipline and control spending in other operational areas.
The company has consistently stated that it regularly reevaluates its organizational structure to ensure it is effectively investing for future growth.
As of the end of June 2024, Microsoft reported a global workforce of 228,000, with 45,000 of these employees situated in sales and marketing roles.
It is a common practice for the tech giant to undertake major organizational changes and announce other strategic adjustments close to the end of its fiscal year, which concludes on June 30th.
These layoffs, therefore, appear to be part of a broader, ongoing strategic realignment by Microsoft as it prioritizes AI development and seeks to optimize its operational efficiency across its diverse business units.
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