A few weeks ago, I shared insights on Xbox’s potential resurgence, buoyed by a promising showcase and a renewed commitment to hardware. However, the landscape shifted dramatically when Microsoft announced a staggering 9,000 layoffs, bringing the total for the year to over 15,300. Among these cuts were numerous positions within Xbox, raising concerns about the future of first-party hardware and the overall direction of the gaming division. The timing of Microsoft’s announcement regarding the release of Helldivers 2 on Xbox, marking it as the first PlayStation-published title on the platform, could not have been more unfortunate. This rollercoaster of emotions—“Xbox is dead, Xbox is alive”—is a narrative that resonates not just with Xbox, but across all of Microsoft’s divisions.
Having covered Microsoft’s various sectors, including Xbox, Windows, and Surface, for a decade, I have witnessed the company navigate through triumphs and setbacks. My journey began as an enthusiastic blogger with a passion for Xbox, gradually evolving into a more nuanced understanding of the tech industry. Throughout this time, I have endeavored to balance my fandom with a critical perspective, voicing community concerns about the need for more Japanese games, improved localization, and enhancements to the Xbox PC experience. While Microsoft has made strides in some areas, the inconsistent messaging and shifting strategies have left both customers and employees feeling neglected.
Under Satya Nadella and Amy Hood, Microsoft has become a glorified investment bank, bereft of delivering innovation
Under the leadership of CEO Satya Nadella and CFO Amy Hood, the notion of being a “fan” for developers, potential employees, and customers has become increasingly untenable. Microsoft’s corporate culture now feels directionless, with strategies changing rapidly and thousands of layoffs casting a shadow over morale. Sources within the company attribute the recent layoffs to Hood’s unrealistic fiscal expectations, which have fostered an environment of fear and uncertainty, ultimately hindering productivity and profitability.
There is a palpable sense among Microsoft employees that the layoffs are part of a broader pivot towards artificial intelligence, driven by concerns from executives and activist investors about the company’s standing in the AI race. The partnership with OpenAI, once a beacon of innovation, appears strained, with OpenAI seeking to distance itself from the constraints of its early investment deal with Microsoft. This partnership, which grants Microsoft exclusive rights to certain aspects of OpenAI’s operations, is set to expire in 2030, leaving investors anxious about the sustainability of Microsoft’s AI initiatives.
Microsoft’s own AI products, many of which rely on OpenAI’s technology, have not fared well in practice. The Copilot feature, for instance, is a limited version of ChatGPT, and the “Microsoft 365 Copilot” has faced criticism for its lack of functionality. Even basic features, such as generative erase in the Photos app, fall short compared to competitors like Samsung. The only notable product to emerge from Microsoft’s AI endeavors, Windows Recall, has been met with widespread disdain due to privacy concerns, despite attempts at improvement.
It’s a testament to Xbox’s leadership that it was able to convince Microsoft to invest in Activision when it had the chance, because I’d be willing to bet that Satya Nadella and Amy Hood would have sacrificed all of Xbox to chase this latest AI splurge without it.
There is a sentiment that Microsoft’s executives and shareholders resent the investment in Activision-Blizzard, viewing it as a diversion from their AI ambitions. The company is poised to invest billion in new AI training centers globally, a move that raises questions about the opportunity cost of not investing in its core gaming and consumer products. The layoffs appear to be a means of reallocating resources to support this new focus on AI, highlighting the human cost of Microsoft’s strategic miscalculations.
Microsoft treats its consumer businesses like a utility, forgetting the human element
From Surface to Windows Phone, and Xbox to Windows itself, Microsoft under Nadella has seemingly lost sight of the fact that real people use its products. The Windows Recall privacy debacle last year was a glaring example of this oversight, prompting one to wonder how such a misstep could have gone unnoticed during the product development process. The Copilot+ PC range exemplifies this trend, characterized by uninspired design and a lack of thoughtful consideration for user experience.
Once a leader in hardware innovation, the Surface brand has become a vehicle for chasing fleeting tech trends rather than fostering genuine creativity. The departure of key figures like Panos Panay has left a void in leadership, stifling the innovative spirit that once defined the Surface line. As a result, Microsoft’s product offerings have become increasingly uninspired, lacking the excitement and cutting-edge design that once set them apart.
Moreover, the company’s approach to emerging technologies, such as Windows Mixed Reality and Windows on Arm, reflects a pattern of overhyping initiatives without the necessary investment to see them through. The recent focus on AI, while promising, appears to prioritize external partnerships over internal innovation, leading to a dilution of Microsoft’s once-legendary developer events into mere investor showcases.
Microsoft as a company has no mission or ethos — perhaps it never did
Historically, Microsoft has engaged with its community, fostering a sense of belonging among fans through events like Xbox FanFest. However, this year’s Summer Game Fest saw Microsoft absent from such community-building efforts, leaving dedicated fans to organize their own events. This lack of engagement is disheartening, especially considering Microsoft’s substantial profits and market capitalization.
The recent layoffs, which seem indiscriminate and overly aggressive, have left many employees grappling with uncertainty about their futures. These cuts affect individuals who have dedicated years to building Microsoft’s success, only to see their contributions overshadowed by corporate decisions aimed at boosting margins. While other companies have also faced layoffs, the pervasive sense of instability at Microsoft raises questions about the company’s commitment to its workforce and its consumers.
As Microsoft continues to navigate this tumultuous landscape, it becomes increasingly clear that the company lacks a coherent mission or ethos. Instead, it operates more like a financial institution, prioritizing short-term gains over long-term innovation and consumer trust. In a world where Microsoft possesses the resources to cultivate genuine innovation, it appears to be more focused on capitalizing on trends than on fostering a loyal customer base. The harsh reality of the layoffs serves as a stark reminder of the consequences of a profit-driven mentality, leaving many to wonder if Microsoft ever truly valued its community or its mission.
