Microsoft Layoffs 1900 employees in Gaming Division Post Activision Blizzard Acquisition

In a move signalling a strategic realignment after it acquired Activision Blizzard, Microsoft announced a significant workforce reduction in its gaming unit.

According to a memo obtained by CNBC on Thursday, approximately 1,900 employees, constituting nearly 9% of the division’s headcount, are set to be laid off.

Microsoft Gaming CEO Phil Spencer announced the layoffs as part of a broader “execution plan” to minimise “areas of overlap.” 

This development comes just over three months after Microsoft successfully concluded its high-profile $69 billion acquisition of Activision Blizzard. This deal marked the company’s largest ever, surpassing the 2016 purchase of LinkedIn in size.

Phil Spencer emphasized that the restructuring aims to optimize the combined strengths of Microsoft and Activision Blizzard, aligning their resources and expertise more efficiently.

He assured affected employees of “full support,” including location-dependent severance packages, to assist them through the transition.

Former Blizzard President Mike Ybarra, who joined Microsoft post-acquisition, announced his departure on social media. Blizzard co-founder Allen Adham, the unit’s design chief, is also leaving the company. 

In a memo disclosed by The Verge, Matt Booty, head of Microsoft’s gaming studios, confirmed Adham’s departure and revealed that Blizzard would cease development on a new survival game.

Microsoft’s acquisition of Activision Blizzard brought renowned gaming franchises such as Call of Duty and Diablo under its umbrella, along with the mobile gaming giant King, which was responsible for popular titles like Candy Crush Saga.

While the news of the layoffs didn’t significantly impact Microsoft’s stock, remaining essentially flat, the reaction aligned with expectations following large-scale mergers.

Investors often anticipate workforce adjustments to optimize operations and streamline efficiencies. The current economic landscape has heightened expectations among tech investors for increased efficiency and a more straightforward path to growth and profitability.

The tech industry has already witnessed several notable layoffs unrelated to mergers and acquisitions in the early weeks of 2024. 

Companies ranging from Tencent-owned Riot Games to TikTok and Discord have implemented substantial workforce reductions.

These actions follow a challenging 2023, marked by over 100,000 tech workers being laid off.

In a separate context, eBay and SAP recently announced significant workforce changes. eBay disclosed plans to lay off 1,000 workers, while SAP detailed its intention to shift or buy out 8,000 employees.

Unlike Microsoft, eBay and SAP experienced positive market reactions, with a noticeable increase in share prices after the announcements.

As Microsoft navigates the evolving landscape of the gaming industry, the company’s strategic decisions post-acquisition will likely play a pivotal role in shaping the future trajectory of its gaming division.

The workforce changes reflect the ongoing efforts to integrate and optimize the collective capabilities of Microsoft and Activision Blizzard in the highly competitive gaming market.