Following the recent mass layoffs at Microsoft, which have affected around 1,600 jobs at Xbox so far, division CEO Asha Sharma has spoken about the decisions that led to them. In an interview with Fortune, she said that the company had made several bets in the past that, unfortunately, haven’t quite paid off. Ultimately, these bets, along with a lack of focus on Xbox’s core business, led the company to spread itself “too thin”.
“In order to grow, we made a bunch of bets … and as we did that, we inherently didn’t focus on the core business,” said Sharma. “The number one measure of your strategy is what you put your resources behind, and we simply spread ourselves too thin.”
As part of Sharma’s attempts at turning Xbox around, she had also announced that four of the division’s studios would be let go: Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs. Of these, the first two are going independent, while the latter two are being sold to another company. Xbox is also currently looking at what it can do with Arkane, noting that the studio will undergo consultation and that the company will “review potential strategic options”.
Furthermore, Sharma has also confirmed that there are more layoffs planned over the course of Microsoft’s current fiscal year, with around 1,600 more job cuts slated to happen before June 30th, 2027.
“I know this is painful. These changes will directly affect people who have poured their creativity into building Xbox,” said Sharma in a company-wide email. “Many joined us through acquisitions, while others were recruited here, or sought us out because they loved this industry and loved Xbox. Today’s decisions do not reflect their talent or dedication.”
In announcing the layoffs, Sharma had made similar mentions of the problems faced by Xbox, where the company kept investing despite a weakening of its core business in the hopes of a better outcome. This, paired with an industry-wide hardware crisis, has led to Xbox needing a “reset”.
Noting that Xbox hadn’t grown as the company had expected it to, Sharma said, “As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset Xbox.”
Along with layoffs, Sharma also announced that the Xbox division would be going through major restructuring efforts. This involves the flattening of the entire organization with a maximum of five management layers between studios and decision makers. Where it can afford to, the company will go for only three layers.
In a bid to add more accountability to the entire division, Xbox also now has a new chief operating officer – Helen Chiang. Noted as having worked across the division on Xbox Live and Mojang, Chiang will be taking over the role from Dave McCarthy, who is retiring after 17 years at the company. Chiang will also be directly responsible for end-to-end profits and losses for the division.
