Xbox CEO Asha Sharma has revealed that a series of strategic missteps and a failure to focus on the core business led to the recent extensive layoffs and studio divestitures within the company. In an interview with Fortune, Sharma stated that Microsoft's earlier investments in areas such as Game Pass, expanding to multiple platforms, and growing its studio roster did not yield the expected returns.
Sharma explained that in the pursuit of these new ventures, the company "inherently didn't focus on the core business." She emphasized that the allocation of resources is the primary indicator of a strategy's success, and Xbox "simply spread ourselves too thin." The memo to staff indicated that the current state of the Xbox business is unhealthy, making it difficult to navigate market challenges, including a hardware crisis exacerbated by component shortages. Sharma noted that this unhealthy state "accelerates a lot of the changes we need to make."
The ongoing restructuring is described as a "reset" that involves significant downsizing. Approximately 1,600 employees have been laid off, with an additional 1,600 cuts planned over the next year. Microsoft is also spinning off studios Double Fine and Compulsion, and is in the process of selling Ninja Theory and Undead Labs, though buyers for the latter two have not yet been named. Arkane Lyon is currently in a consultation period that will determine the fate of the studio and its work on the Marvel's Blade project.
These layoffs are part of broader workforce reductions at Microsoft, affecting around 4,800 positions, or roughly 2% of the company's total workforce, in the latest round of cuts.