Microsoft Corporation (NASDAQ:MSFT) has announced an 8% cull to its gaming division merely three months after fighting tooth and nail to finalise its $69 million acquisition of Call of Duty publisher Activision Blizzard.
In a leaked memo, the Redmond megacap said it has made the “painful decision” to sack approximately 1,900 roles out of the 22,000-strong department, with the newly acquired Activision Blizzard team bearing the brunt of the restructuring.
In addition to these layoffs, Blizzard president Mike Ybarra president today announced his surprise departure in a bittersweet Twitter/X post.
I want to thank everyone who is impacted today for their meaningful contributions to their teams, to Blizzard, and to players’ lives. It’s an incredibly hard day and my energy and support will be focused on all those amazing individuals impacted – this is in no way a reflection…
— Mike Ybarra ???? (@Qwik) January 25, 2024
Allen Adham, Blizzard’s co-founder and chief design officer, who played a pivotal role in creating the hit World of Warcraft computer game, will also be leaving the studio.
The terms of Adham’s departure are unclear, but Blizzard confirmed that a highly anticipated, unnamed survival horror game has been cancelled as a result of the executive exodus.
“Blizzard is ending development on its survival game project and will be shifting some of the people working on it to one of several promising new projects Blizzard has in the early stages of development,” read the memo.
The layoffs represent barely one percent of Microsoft Corporation (NASDAQ:MSFT)’s 221,000-strong global workforce.
Nonetheless, they’ve created an air of unease a week before the firm’s second-quarter results.
Microsoft is expecting a diversity of outcomes from its constellation of sales pipelines.
Gaming revenues are expected to increase by over 40% following the $69 billion Activision acquisition closed in October, though investors should expect nearly $1 billion in purchase accounting adjustments on top of integration and transaction-related costs.
Commercial bookings and on-premises server revenues are anticipated to be relatively flat while Microsoft Azure should grow by a quarter, largely thanks to new artificial intelligence integrations.
Microsoft Office 365 revenue is expected to grow roughly 16% on a constant currency basis, while LinkedIn should see mid-single-digit growth, driven by Talent Solutions and Marketing Solutions.
Capital expenditures are expected to rise due to investments in cloud and AI infrastructure.
Cost of goods sold (COGS) is expected between $19.4 to $19.6 billion, with operating expenses between $15.5 billion and $15.6 billion.
News of the headcount reduction failed to impact Microsoft’s share price on Thursday, with the stock remaining 9.3% higher year to date.
Second-quarter results are due on the 30th of this month.