In a move that marks a significant shift in the gaming industry, Microsoft Gaming is set to lay off approximately 1,900 employees, constituting around 9% of its gaming unit workforce.
“We have made the painful decision to reduce the size of our gaming workforce by approximately 1900 roles out of the 22,000 people on our team,” the company said.
The news came to light through an internal memo released by the company on Thursday, where Microsoft Gaming CEO Phil Spencer detailed the restructuring plan, emphasizing a broader “execution plan” aimed at reducing “areas of overlap.”
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The layoffs come just over three months after Microsoft’s monumental $69 billion acquisition of gaming giant Activision Blizzard, which closed in late 2023.
Former Blizzard president Mike Ybarra has announced his departure from both Microsoft and Blizzard on the social media platform X. While acknowledging the difficulty of the decision, Spencer assured that Microsoft would provide “full support” to all affected employees, including location-dependent severance packages.
Activision Blizzard, known for developing and publishing popular gaming franchises like Call of Duty and Diablo, also owns the mobile gaming subsidiary King, responsible for the globally renowned Candy Crush Saga. The strategic acquisition of Activision Blizzard was Microsoft’s largest to date, more than doubling the size of its 2016 purchase of LinkedIn.
Despite the magnitude of the layoffs, Microsoft’s shares remained largely unaffected, as such restructuring is often anticipated after sizable mergers and acquisitions.
The tech industry has witnessed a trend of increased efficiency and a clearer path to growth or profitability as economic pressures mount. This move by Microsoft is part of a broader trend, with other major tech companies implementing deep cuts in the early weeks of 2024, independent of mergers and acquisitions.
Companies such as Tencent-owned Riot Games, TikTok, and Discord have all announced layoffs in the wake of a challenging 2023 that saw over 100,000 tech workers lose their jobs.
This week alone, eBay and SAP joined the list of companies announcing significant workforce reductions, with eBay planning to lay off 1,000 workers and SAP intending to shift or buy out 8,000 employees. Unlike Microsoft, both eBay and SAP experienced a notable increase in their share prices following their announcements.
The internal memo from Microsoft Gaming’s leadership outlined the reasoning behind the layoffs. As the company integrates Activision, Blizzard, and King into its structure, leadership is focused on developing a sustainable cost structure to support the growing business.
The memo emphasized the commitment to aligning strategy and execution plans, identifying areas of overlap, and prioritizing opportunities for growth.
Despite the challenges, Microsoft Gaming remains optimistic about the future, expressing confidence in the team’s ability to create and nurture games, stories, and worlds that bring players together.
In the memo, the company assured support for affected employees during the transition and encouraged colleagues to treat departing team members with respect and compassion, in line with the company’s values.
Tech companies are coming under increasing pressure to demonstrate efficiency and create a clear path to growth and profitability. Moves like this are aimed at positioning companies for sustainable growth as economic uncertainties persist.