Episode summary
Microsoft’s Xbox to Cut 3200 Jobs, Divest Studios in Overhaul | Bloomberg Intelligence
Bloomberg Intelligence
· · 25 min · Hosts: Paul Sweeney, Scarlet Fu · Guests: Brody Ford, Bailey Lipschultz, Tim Craighead, Sam Fazeli
Summary
Microsoft’s Xbox unit is moving into a major restructuring, planning to cut 3,200 jobs and divest several game studios as Microsoft tries to improve margins in a business that has lagged the rest of the company. The guest said Xbox margins are three to 10 times lower than comparable businesses, and argued Microsoft is keeping the platform while backing away from owning as much content creation. The discussion tied the cuts to broader pressure on tech companies to reallocate capital toward AI, data centers, and infrastructure.
The episode also covered SK Hynix’s US ADR offering, which the guest said could be a roughly $28 billion transaction and one of the largest listings ever. The deal is meant to give US investors easier access to a company that has surged on demand for memory chips, but the guest said timing matters because semiconductors are cyclical and the market is still debating whether this rally is sustainable.
Later, the host and guests highlighted Tim Craighead’s Q3 watch list, including Microsoft, Mattel, and SolarEdge, before turning to Novartis’s agreement to buy Myricx Bio for as much as $1.5 billion. The healthcare guest said Novartis is buying a platform aimed at delivering chemotherapy more directly to tumors, part of a broader wave of pharma M&A driven by strong cash flow and healthy balance sheets.
Key takeaways
- The guest said Microsoft is cutting about 20% of Xbox staff because the division’s margins are far below comparable businesses and the company wants to focus on the platform, not as many studios.
- The host said Microsoft’s broader plan includes about 6,400 job cuts as the company trims spending while pouring money into AI infrastructure and data centers.
- The guest said SK Hynix’s US ADR sale could be about $28 billion, making it one of the largest listings ever and opening the stock to more US buyers.
- The guest warned that semiconductors are still highly cyclical, so SK Hynix’s strong rally does not guarantee the demand backdrop will stay this hot.
- The healthcare guest said Novartis’s Myricx deal is a platform bet aimed at improving tumor targeting while reducing side effects, and could take years to pay off.
- The healthcare guest said most major pharma companies are in a position of strength to keep doing M&A because cash flow and balance sheets remain solid.
Notable quotes
“Xbox is operating at margins three to 10 times lower than comparable businesses”
“So today, Xbox is the one that we see really kind of getting that hammer”
“this is a company worth more than a trillion dollars”
“Semiconductors are the most cyclical business on Wall Street”
“The hope being that you can reduce the side effect profile and increase the efficacy”
How the episode opens
Bloomberg Audio Studios, podcasts, radio, news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m.
Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Pieces of news coming across the tape here this morning particular on the tech side is Microsoft's Xbox unit plans to cut 3200 jobs and Devest Studios in another overhaul here.
Brody Ford, Bloomberg technology reporter uh joins us here. Brody, what's going on at Microsoft here today?
Pretty much across the industry of technology, you see companies trying to rethink where they're spending money. A lot of this is fueled because they're spending so much on AI and building out data centers and infrastructures that they're taking a closer look across all divisions. So today, Xbox is the one that we see really kind of getting that hammer.
They laid out a plan to cut about 20% of staff over the next year. Um, and broader at Microsoft, it's a plan to cut about 6,400 people. Um, again, just kind of trimming both an Xbox and sales, trying to reorient for what they say will help, you know, them grow in this next era.
Brody, what is the rationale for Microsoft keeping Xbox? Um, the CEO of the Xbox division uh wrote in a note to staff uh this morning, and this is based on your reporting, that Xbox is operating at margins three to 10 times lower than comparable businesses. I mean, financially, it's not keeping up.
So, why does Microsoft want to keep it? It's a good question. Microsoft really has traditionally struggled with consumer businesses.
You know, every time they've kind of tried to spin up, say, like a smartphone or things of this nature over history, it hasn't always gone super well.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- xbox restructuring
- gaming studios divestment
- sk hynix adr process
- healthcare deal
- memory chip market
Companies and tickers mentioned
- MSFT
- NVS
- Microsoft
- SK Hynix
- Novartis AG
- Myricx Bio
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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