There could be unseen ramifications for Microsoft’s acquisition of Activision-Blizzard.
Microsoft will spend $1.2 billion on severance and reorganization fees as they cut 10% of their workforce in the latest round of cuts in the tech industry.
The move from Microsoft, the owners of XBOX and the Windows Operating System will see 5% of its workforce lose their jobs.
Cutting back was always on the cards for Microsoft following the Covid-19 pandemic. Increased demand on tech companies during the crisis meant that more jobs were created. Microsoft themselves created 40,000 jobs in their last fiscal year.
Microsoft joins Amazon and Meta in cutting huge portions of their company's respective workforces. At the start of January, Amazon announced plans to axe 18,000 jobs within its structure. Last year, Meta put forward plans cut 13% of its worker base.
Microsoft CEO Satya Nadella announced the cuts in a blog post on the Microsoft website. He detailed the fact that the company will continue to seek new growth despite losing 5% of its employees.
"These decisions are difficult, but necessary"
"These decisions are difficult but necessary," the post said. "They are especially difficult because they impact people and people’s lives – our colleagues and friends. We are committed to ensuring all those whose roles are eliminated have our full support during these transitions.
Microsoft will tell some of those who will lose their jobs immediately. Others will be told over the course of the year. The aim for Microsoft is to be done with the layoffs by Q3.
It could be construed to be of bad taste that Microsoft is laying off so many people whilst in talks for one of the biggest takeovers in business history. But that should not be the case.
A fall-off in demand for all things in the technology business space means that there just simply are not enough roles that need filling right now.
As part of the announcement, Microsoft confirmed that they will continue to look at new hires. These will include hires in the Artificial Intelligence space.
"We will continue to invest in strategic areas for our future, meaning we are allocating both our capital and talent to areas of secular growth and long-term competitiveness for the company while divesting in other areas.
"It’s important to note that while we are eliminating roles in some areas, we will continue to hire in key strategic areas."
The knock-on effect in the gaming world
Microsoft have been at the forefront of gaming news over the last 12 months. The announcement comes, coincidentally, one year to the day since Microsoft announced the acquisition of Activision-Blizzard.
Acti-Blizz is one of the biggest commodities in gaming. It is a company that encompasses some of the biggest gaming franchises in the world. They create the games in the Call of Duty, Overwatch, World of Warcraft, Diablo, and Hearthstone franchises.
Activision-Blizzard itself has, at the last estimate, 9,800 employees, nearly as many as jobs being cut by Microsoft.
The acquisition of Activision-Blizzard is worth $68.7 billion and is causing legal issues across the world. Microsoft are having to clear the deal with all of the independent regulatory commissions. These govern for protecting competing companies and their rights.
These talks are currently ongoing with the European Commission and United States Federal Trade Commission both dissecting the deal and what it means for the further gaming world. The FTC are looking increasingly likely to file an antitrust lawsuit against the acquisition. That means the deal may even fall through at some point.
Activision-Blizzard is in a strange place right now. The company is in a kind of limbo whilst going through the takeover process.
The Overwatch League has combined together to battle against the league owners. Teams in the Overwatch League are failing to see returns on the investments that they made to be part of the franchised competition initially.
A report from Jacob Wolf says that the teams have been spending more than $1 million in operating costs per annum maintaining their respective franchises.
This could end up being an awful look for Activision-Blizzard, the Overwatch League, and Microsoft if Collective Bargaining fails and the suit becomes a fully-fledged being. These talks are still in the preliminary stages according to Wolf. It could be some time before we see a resolution to the matter.
Microsoft cutting 5% of its jobs may not seem like it has a connection to the merger with Activision-Blizzard. On the surface that is correct. However, one way to see the cutting of the Microsoft jobs could be in preparation for an influx of new employees if the merger is approved.
That is likely part of the reason, but not the whole story, as most of it still relays back to a sharp snap back in the demand on the tech sector.