The largest restructuring in the history of Microsoft’s Xbox is accelerating, in what Asha Sharma, its chief executive, described as a fundamental reset of how Xbox operates and invests.
Sharma unveiled sweeping changes at the gaming unit Monday, primarily layoffs that will affect roughly 3,200 people, or 20% of staff—1,600 employees will be affected immediately, and the other 1,600 are expected to be cut over the next year. The cuts are part of a broader workforce reduction at Microsoft announced Monday that is expected to impact about 2% of its 228,000 employees. Xbox is also spinning off four of its studios.
“In order to grow, we made a bunch of bets … and as we did that, we inherently didn’t focus on the core business,” Sharma told Fortune. “The number one measure of your strategy is what you put your resources behind, and we simply spread ourselves too thin.”
The unit’s new plan centers on returning focus to its flagship Xbox console, which represents 80% of its business, funneling its content budget toward high-growth areas such as the Minecraft game, and stepping away from smaller studios. It is also moving from a decentralized studio model to a more centralized one, and will strip out management layers.
