The Xbox 360 is still right at the top of console purchases, the Xbox One is climbing the sales ranks against stiff competition from the PS4 (thanks in part to dropping the Kinect requirement and reducing the console bundle’s base price) and the Windows Phone operating system is slowly but surely increasing its margin in the mobile market. Even the PC market has gone from a steep decline to a profitable plateau so it seems that things for Microsoft are good all round.
Except not quite as in the face of their $7.2 billion acquisition of Nokia’s Devices and Services business, they also promised $600 million cost savings in the 18 months following the closure of the deal. The nigh on impossible task that Microsoft has set themselves led to rumors earlier this week that an astonishing amount of job cuts would be made at the company. Microsoft CEO Satya Nadella has now confirmed the cuts in an email to employees, made public via Microsoft themselves. Not only will the cuts affect almost every aspect of Microsoft’s business but it’s also the biggest round of job losses in the company’s 39-year history.
According to Nadella, Microsoft will be cutting “up to 18,000” jobs so while it might not reach that high figure, the knowledge that near 14% of Microsoft’s 127,000 strong workforce may face the axe in the next year is hardly going to instill much confidence. Those on the Nokia side of things (30,000 Nokia workers were given jobs as part of the deal) will be quaking in their desk chairs more than existing Microsoft workers though as 12,500 of those jobs will be in Nokia across both professional and factory positions.
Those jobs will be ditched across the next six months presumably allowing Microsoft to evaluate where else they need to get a bit more lean before that job cut year is up. The rest of that 18k figure could potentially cause job losses for higher-ups as Nadella’s says that they “plan to have fewer layers of management” across the board in an effort to “accelerate the flow of information and decision making” which could likely lead to more responsive and impactful decisions like dropping Kinect from Xbox One as the teams who know their business the best won’t have to wrestle power from anyone’s hands as they attempt to change things for the better.
On the video games and entertainment side of things, Xbox’s division will be affected as well. Microsoft exec. Stephen Elop may have described Xbox as a “fundamental focus” in the email that followed Nadella’s memo and he may even have detailed plans for how the cuts will be mostly mobile but it’s also been revealed that Nadella (who outranks him and everyone else at Microsoft) does not feel that Xbox is one of their “core” brands.
“I want us to be comfortable to be proud of Xbox, to give it the air cover of Microsoft, but at the same time not confuse it with our core.”
That’s what he told Fortune in an interview earlier this week leading to speculation that some of the biggest plans in Xbox’s pipeline will be frozen and cut off at the head. One such plan that’s likely to suffer is the Xbox Originals project that’s set to bring original programming to Xbox 360 and Xbox One.
Rumors suggest that the original TV shows project is one place where Nadella is thinking of separating the wheat from the chaff in an effort to figure out what’s vital and what’s not. The Halo series Nightfall and the Atari documentary Signal to Noise are both expected to escape unscathed but Nancy Tellem’s job (Tellem is in charge of the original programming) and the other projects including a robotic sci-fi thriller that was being made in collaboration with British TV network Channel 4 might not.
Nadella is however, encouraging people to take part in his monthly Q&A session (set to take place tomorrow) and he also mentioned the public earnings call that’s happening on July 22nd so hopefully we’ll be able to find out more about Microsoft’s job cut plans then.