Xbox Hit Hard by Microsoft Cuts?

1,400 Microsoft jobs cut immediately

Posted by Staff
Xbox Hit Hard by Microsoft Cuts?
Blogging and rumour would indicate that Microsoft's Entertainment and Devices Division - the division responsible for Xbox - is taking the bulk of the 1,400 immediate layoffs at the technology giant.

The 'job eliminations' were announced by Microsoft CEO Steve Balmer in an email to staff. However, no specific mention of the E&D Division was made in the text, which read as follows:

"As part of the process of adjustments, we will eliminate up to 5,000 positions in R&D, marketing, sales, finance, LCA, HR, and IT over the next 18 months, of which 1,400 will occur today.

"We'll also open new positions to support key investment areas during this same period of time. Our net headcount in these functions will decline by 2,000 to 3,000 over the next 18 months.

"In addition, our workforce in support, consulting, operations, billing, manufacturing, and data center operations will continue to change in direct response to customer needs."

The full text can be read here.

The information on the E&D division taking the bulk of the cuts comes from one Mary Jo Foley, who has covered the tech industry for upwards of 20 years, over at ZDNet.

The news follows Microsoft stating poor financial results in the form of $16.6 billion second quarter revenues. This, according to the Balmer email is " increase of just 2 per cent compared with the second quarter of last year and it is approximately $900 million below our earlier expectations."

Entertainment and Devices, remember, also houses Microsoft's ailing Zune business and Windows Mobile.

While Foley asserts that E&D will take most of the hit, cnet states that "a source familiar with the cuts" has told it that the cuts will be spread broadly across the company. It does go on to write, however, that, "Hardest hit in those initial cuts, according to the source, were Microsoft's Entertainment and Devices unit, followed by the Server and Tools unit and the Microsoft Business Division, which houses Office and Microsoft's Dynamics products."

What is certain, however, is that employees tied to gaming have been hit. Nelson Rodriguez and Chris Paladino, both part of the Xbox marketing team have twittered the fact that they've been hit. Both had been part of Microsoft's Gamerscore blog, which closed recently and was clearly a signpost on the road to layoffs.

Similarly, Gamasutra reports that ACES, the Microsoft-owned studio behind the long-running Flight Simulator series, has been severely hit.

This comes as Microsoft reports an 11% year-on-year drop in profit for the last quarter. While E&D reportedly had flat sales of $3.2 billion, operating income fell from $375 million in the same period last year to $151 million. Remember that while the Xbox 360 saw strong sales over Christmas, its success came off the back of price cuts. 24/7Wallst claims that, "In other words, after being assigned its share of Microsoft's corporate overhead, it probably did not break even."

Over on Mini-Microsoft, a blog established in the name of slimming down the company, postings (all made anonymously, it should be noted) vary on where cuts should be made. One poster suggests, "Keep cash cows going (Client, Office, STB) and Xbox but deep cuts everywhere else", while another wrote, "Get rid of E&D! What a crock about Xbox sales when income fell by whopping 60%! Its like sell more and lose heck of lot more."


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