Microsoft hits restart on Xbox

Microsoft Corp. will cut 3,200 jobs, or about 20 percent of its Xbox workforce, over the next year as part of a sweeping overhaul of its gaming division.

The company will eliminate 1,600 positions immediately, with the remaining cuts taking place over the next 12 months. The move is part of a broader Microsoft restructuring that will eliminate 6,400 jobs companywide.

Xbox will also divest four game development studios and begin exploring strategic options, including a possible sale, for a fifth studio as it seeks to streamline operations and focus on blockbuster franchises.

“Our business today is not healthy,” Xbox CEO Asha Sharma said in a memo to employees. “We must reset Xbox.”

According to Sharma, Xbox has struggled with declining hardware sales, slower-than-expected growth following Microsoft’s $69 billion acquisition of Activision Blizzard, and shrinking profit margins.

As part of the restructuring: Ninja Theory and Undead Labs will be sold but will continue developing their current Xbox projects, Double Fine and Compulsion Games will return to independent ownership under their founders, Arkane Studios will enter a consultation process as Microsoft explores a possible sale or spinout.

Microsoft said no publicly announced games will be canceled, but the restructuring will affect teams across the Xbox organization.

The company plans to shift more resources toward major franchises such as Minecraft, Fallout, The Elder Scrolls, Doom, Quake and Wolfenstein, while simplifying management and accelerating game development.