Asha Sharma’s appointment as CEO of Xbox was attention-grabbing from the moment she was named to the position in February. She was promoted after two years as an AI executive at Microsoft, and took over Microsoft Gaming (renamed Xbox) over Sarah Bond, who had been leading the Xbox brand but whose strategy was in question.
Yesterday, Sharma made clear how much of a reset she intends at Xbox. The company is laying off 3,200 people—1,600 now and another 1,600 over the next year—and divesting from four studios. Microsoft did cuts to about 2% of its total workforce; Xbox’s cuts were 20% of its own.
My colleague Sebastian Herrera has an exclusive interview with Sharma about her new strategy.
“We simply spread ourselves too thin,” she told Sebastian of the problems at Xbox. Microsoft reported a 7% decrease in quarterly gaming revenue in its latest financial report, driven by a 33% drop in Xbox hardware revenue and a 5% decline in Xbox content and services. Despite investing over $20 billion in content and hardware over the past five years (excluding Activision Blizzard), annual revenue has declined by nearly half a billion dollars. On Monday, Sharma told employees in a memo that Xbox’s operating margins are three to 10 times lower than comparable businesses. It’s one of Microsoft’s worst-performing divisions.
