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Microsoft Puts Shareholders Ahead of Gamers

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By estradaanton @ Adobe Stock

Video game workers. Now, that’s an oxymoron if I’ve ever heard one. What’s noteworthy is the continued softening of sales post-pandemic. I like Microsoft’s positioning to reduce its video game workforce in the face of what might be a slowdown in demand. Sarah E. Needleman reports for The Wall Street Journal:

Microsoft is laying off approximately 650 employees from its videogame business, the tech giant’s latest move to cut costs after its $75 billion acquisition of Activision Blizzard last year.

The layoffs affect mostly workers in corporate and support roles and are being done to “organize our business for long-term success,” said Phil Spencer, chief executive of Microsoft Gaming, in a company email Thursday viewed by The Wall Street Journal. No studios will be closed, nor will any games, devices or experiences be canceled, he said.

Microsoft’s game-division layoffs are part of a significant downsizing in the global games industry. While demand for interactive entertainment shot up during the pandemic—following decades of mostly steady growth—consumer spending declined in 2022 and has rebounded only modestly since then.

The move also comes as Microsoft has been investing heavily in artificial intelligence, including more than $13 billion in funding for ChatGPT-maker OpenAI. The tech giant said it spent $19 billion on capital expenditures and equipment in the three months that ended in June. The figure is the same amount the company spent in 2019 for the entire year.

The gaming-division cuts Thursday follow the Xbox maker’s decision to let go of roughly 1,900 workers from the unit at the start of the year and the closure of three of its studios in May.

In January 2023, Microsoft laid off 10,000 employees across all of its businesses, including Xbox personnel. The company then gained around 10,000 employees with the October acquisition of Activision, the biggest deal in its history.

Action Line: It’s difficult for companies to cut employees, but executives have a duty to shareholders to protect the value of the company. Prudent management of investor capital is to be commended. When you want to talk about companies putting shareholders first, I’m here. In the meantime, click here to subscribe to my free monthly Survive & Thrive letter.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.

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