The past week internal sources at Microsoft, have been making public a barrage of emails and notes passed down from the new CEO Satya Nadella. All letters cumulating in a huge shift internally at Microsoft as they not only focus on realigning a solid business plan for their once “golden child” Xbox One, but also in their technology divisions.
One of these cuts include the Santa Monica and Vancouver branch of “Xbox Studios Entertainment,” The leads in creating original programming for the Xbox One’s All-in-one platform.
Microsoft since E3 has vowed to change their game plan and switch to a more Gamer friendly approach. With almost no mention of the Kinnect at E3, but also focusing all their power on video gaming.
Not only do the cuts involve things related to the Xbox One, but also in their mobile department. This made very clear on Thursday as Microsoft announced its plans to cut up to 18,000 jobs this year — its deepest-ever cuts — as the company looked to digest its Nokia acquisition and reposition itself for the future.
“Following the Nokia acquisition, completed in April, Microsoft had roughly 127,104 employees, meaning the cuts could reduce nearly 15 percent of its workforce.
Shares of Microsoft rose 3 percent in morning trading on the Nasdaq.
Microsoft said the company is “moving now” on 13,000 of the job cuts, with the vast majority of the overall cuts coming in the next six months and fully implemented over the next 12 months.
Some 12,500 of the cuts are coming from the Nokia Devices and Services unit — roughly half that unit’s workforce. The company said it expects pre-tax charges over the next four quarters of $1.1 billion to $1.6 billion for severance and other costs.
The cuts are just the latest acknowledgement by Microsoft and new CEO Satya Nadella that the company is committed to making tough decisions to improve its position in the technology landscape.
“The first step to building the right organization for our ambitions is to realign our workforce,” Nadella said in a note to employees Thursday. “It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas. My promise to you is that we will go through this process in the most thoughtful and transparent way possible.”
After years of being so dominant that it drew the ire of antitrust regulators, Microsoft now finds itself a distant third in the overall market for computing devices — PCs, phones and tablets. A telling slide at Microsoft’s partner conference last week noted that the company’s share of that broader computing market is just 14 percent. Nadella outlined a good chunk of his thinking in a 3,100-word memo last week in which he talked about the need for Microsoft to rethink both its corporate culture and the way it builds products.
“The day I took on my new role I said that our industry does not respect tradition — it only respects innovation,” Nadella wrote. “I also said that in order to accelerate our innovation, we must rediscover our soul — our unique core.”
The question for the company now is whether this round of cuts will help accelerate that change or merely instill additional uncertainty.”
So where is the silver lining in all of this?
Well with the realignment, comes what appears to be a more solid and streamline business plan focusing solely on gaming. This comes at the tail end of a $100 price drop on the Xbox One and the doubling of sales, compared to the prior month. Not only that but Phil Spencer, the head of Microsoft Studios, issued a statement, confirming that the executives Tellem, Jordan Levin and other members of the team will remain to work on original programs that are already in production, such as the upcoming documentary series “Signal to Noise” whose first installment takes on the rise and fall of gaming icon Atari, and “Halo: Nightfall.” The “Halo” television series will continue as planned.
Also “Xbox will continue to support and deliver interactive sports content like ‘NFL on Xbox,’ and we will continue to enhance our entertainment offering on console by innovating the TV experience through the monthly console updates,” Spencer said. “Additionally, our app partnerships with world-class content providers bringing entertainment, sports and TV content to Xbox customers around the world are not impacted by this organizational change.”