Microsoft employees are hit once more by layoffs across multiple groups, including gaming

[Windows Central]

Layoffs hit security, sales, gaming, and more across Microsoft.

Microsoft employees are hit once more by layoffs across multiple groups, including gaming : Read more

 

[Sonivaldo Silva]

So, Microsoft’s gaming division with Xbox and Game Pass is not doing well, with yet another round of layoffs. And worse, in the financial results, they will lie to shareholders and Windows fans, claiming they made a profit, but of course, they only profited by cutting costs and staff. Even Spirit can achieve good financial performance that way.

 

[Cmndr_Bytes]

It's all about keeping those shareholders happy. It's not enough to make profit that profit has to keep ever increasing. Enough is never enough. None of the upper, high level management are going to freeze their pay or bonuses, or god forbid take a cut in pay. Axe the teams doing the work to fill the greed.
*Disclosure. I hold a very small amount of MS shares but I would much prefer them treat those workers better than they do. Happy workers = good products = growth = increase in share price

From MS Website.

Fiscal Year 2024 Compared with Fiscal Year 2023​

Revenue increased $33.2 billion or 16% driven by growth across each of our segments. Intelligent Cloud revenue increased driven by Azure. Productivity and Business Processes revenue increased driven by Office 365 Commercial. More Personal Computing revenue increased driven by Gaming.


Cost of revenue increased $8.3 billion or 13% driven by growth in Microsoft Cloud and Gaming, offset in part by a decline in Devices.


Gross margin increased $25.0 billion or 17% driven by growth across each of our segments.


• Gross margin percentage increased slightly. Excluding the impact of the change in accounting estimate for the useful lives of our server and network equipment, gross margin percentage increased 2 points driven by improvement in More Personal Computing.


• Microsoft Cloud gross margin percentage decreased slightly to 71%. Excluding the impact of the change in accounting estimate, Microsoft Cloud gross margin percentage increased slightly driven by improvements in Azure and Office 365 Commercial, inclusive of scaling our AI infrastructure, offset in part by sales mix shift to Azure.


Operating expenses increased $4.0 billion or 7% driven by Gaming, with 7 points of growth from the Activision Blizzard acquisition, and investments in cloud engineering, offset in part by the prior year Q2 charge.


Operating income increased $20.9 billion or 24% driven by growth across each of our segments.


Prior year gross margin, operating income, net income, and diluted EPS were negatively impacted by the Q2 charge, which resulted in decreases of $152 million, $1.2 billion, $946 million, and $0.13, respectively.

 

[GraniteStateColin]

It is never good when a company or industry is experiencing layoffs. And to the criticisms, some companies, including MS, do seem more willing to turn to layoffs than others who seem to try hard to reassign and train people in order to avoid layoffs. Re-tasking people in areas of need is clearly a better option to layoffs when it's a viable possibility. If nothing else, it's good for morale, and a happier team is a more productive team.

However, some of the comments here ignore that it is a company's ETHICAL AND LEGAL OBLIGATION to grow its profits and to make decisions that will maximize those returns (i.e., if you can grow by 5% or 8% in the current period and choose the 5% option without a compelling reason that it's better for long-term growth, that's a shareholder lawsuit waiting to happen). And big picture, this is a GOOD THING, because without this requirement, investors wouldn't fund startups, innovation and competition would drop, and we'd all be worse off. It's the requirement to prioritize shareholder returns that creates the trust in the market that allows it to exist, which in turn creates those jobs in the first place (including the ones that are not being cut).

The only proper arguments against layoffs are:

1. They will leave the company understaffed, which will alienate customers or reduce capacity to deliver planned results. Either of these will hurt growth prospects and long-term profitability by more than cost savings add.

2. The cost savings will be small. They will also hurt morale. The blow to productivity from the reduced morale will hurt long-term profitability by more than the cost savings add.

You'll notice they both ultimately trace to the same point: long-term profitability. The ONLY reason a company can take a less profitable route in the short run is if the CEO and Board believe that it's to increase profitability by more in the long-run. Because that's impossible to predict with certainty, this gives management teams a fair amount of leeway as long as they can convince shareholders they acted in good faith. If it appears they did it to protect employees over profitability, shareholders have grounds and standing to sue the board for the lost value, and it may even be treated as criminal (unlikely, to be fair). A shareholder lawsuit is so destructive to a company's value, they avoid actions that risk it.

I'd also point out that the announcement does talk specifically about "underperforming employees." This could just be MS making excuses, but that is a LITTLE bit different from general purpose layoffs. This COULD (not sure) still be releasing people following the huge over-hiring they did during COVID (which would be more like temp positions ending) and perhaps some additional lingering redundancies in gaming following those acquisitions.