Microsoft recently announced the layoff of approximately 650 employees from its gaming division, following earlier cuts that included 1,900 layoffs across Xbox, Activision Blizzard, and ZeniMax. These reductions come in the wake of Microsoft’s $68.7 billion acquisition of Activision Blizzard in October last year.

Despite multiple rounds of layoffs, Phil Spencer, head of Xbox, reassured employees in an internal memo that no games, devices, or experiences would be canceled, and no studios would be closed as part of these actions. The layoffs are focused on corporate and support roles rather than game development teams.

Spencer stated that these layoffs are part of aligning the company’s structure post-acquisition and preparing for long-term success. He acknowledged the broader challenges faced by the gaming industry, particularly large tech companies grappling with economic uncertainty. While streamlining operations, Microsoft remains committed to providing severance packages and employment support to affected employees.

An internal letter from Spencer, which was shared with the media, further outlined the company’s rationale. The letter stated minimizing disruption to the development process while cutting costs and improving operational efficiency. Spencer reiterated that these decisions were made to ensure the company’s sustainability and growth over the long term.

Earlier in the year, Microsoft closed several Bethesda studios following its acquisition of ZeniMax Media. These actions, combined with the latest layoffs, have sparked concerns across the gaming industry about the impact of Microsoft’s expensive acquisitions. Many see the layoffs as a consequence of the hefty $68.7 billion Activision Blizzard purchase, which is expected to take time to generate a financial return.

In a related development, Phil Spencer revealed at PAX West that he had made significant missteps in the past, including passing on opportunities to make popular titles like Guitar Hero and Destiny Xbox exclusives. He admitted that some of his decisions, particularly regarding Destiny, were influenced by his lack of enthusiasm for competitive multiplayer games. However, he later recognized the cooperative potential of Destiny after the release of its House of Wolves expansion.

As Microsoft continues to integrate Activision Blizzard, the company faces ongoing pressure to optimize costs, with further layoffs expected as part of its broader efforts to balance growth and financial efficiency.