Microsoft cuts jobs in HoloLens, Surface, and Xbox as layoffs continue

According to people familiar with the situation, Microsoft cut jobs on Thursday in units such as Xbox, mixed-reality hardware for HoloLens and Surface devices, and the 10,000 employees it had previously announced were being laid off.

According to anonymous sources discussing confidential matters, cuts to a significant portion of the HoloLens hardware team raise the question of whether the company will produce a third iteration of the goggles other than the one that was planned for the U.S. Army. One person stated that the Xbox Gaming Ecosystem Group and marketing saw cuts at the Xbox gaming unit.

Thursday, Xbox Chief Phil Spencer sent an email to employees to inform them of the cuts, but he did not specify which areas of his business were affected. In the email that Bloomberg read, Spencer wrote, “I encourage everyone to take the time and space necessary to process these changes and support your colleagues.”

Although it stated that it remains committed to mixed reality and the current HoloLens 2 version, Microsoft declined to comment on the cuts. “While we don’t comment on specific staffing details, we can share there are no changes to HoloLens 2 and our commitment to mixed reality,” the company stated in an emailed statement pointing to a blog post from the previous week regarding its commitment.

According to a notice filed with the state, 617 workers were laid off in the Seattle area.

Microsoft announced last month that it intends to lay off 10,000 workers—roughly 5% of its workforce—in this quarter. In the most recent quarter, it took a $1.2 billion hit to earnings, with $800 million of that going to the layoffs and the rest to “changes to our hardware portfolio” and the cost of consolidating real estate leases. The company has not provided any specifics regarding the hardware modifications or the precise locations of the cuts.

The video game studio that produces Microsoft’s Halo games and other employees in the mixed reality group, including some of the team working on the HoloLens version for the U.S. Army, experienced layoffs last month. After Congress turned down the Army’s request for $400 million to purchase as many as 6,900 of Microsoft’s combat goggles during the current fiscal year, Microsoft won’t be receiving any additional orders for those goggles anytime soon. One person stated that the HoloLens hardware industry’s future may be in jeopardy without a significant order from the Army due to a lack of significant customers.