Microsoft to Make “Hardware Portfolio Changes” Following Widespread Layoffs

In a statement to employees, Microsoft said today that 10,000 people will be laid off and  modifications will be made to its product portfolio. In its Q2 earnings report that will be released next week, the software behemoth would write down $1.2 billion in expenses for severance pay, building rents, and “changes to our hardware portfolio.” 

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.

As such, we are taking a $1.2 billion charge in Q2 related to severance costs, changes to our hardware portfolio, and the cost of lease consolidation as we create higher density across our workspaces.

-Microsoft CEO

The phrase “platform shifts” is revealing, but Nadella doesn’t go into detail about the changes that have been done or will be made to the company’s hardware assortment. Currently, Microsoft sells a variety of devices, such as Xbox gaming consoles, PC add-ons, Surface peripherals, HoloLens headsets, and more.

Before the epidemic began, Nadella was considering a future beyond Windows, iOS, and Android, even though Microsoft made significant investments in Windows 11 during the pandemic and the surge in PC sales. In January 2020, he even made the joke that Windows may one day be dubbed Azure Edge, making it abundantly obvious that Microsoft’s largest hardware business is in the cloud.

Microsoft included sales of the HoloLens, Surface, and PC accessories under the heading “devices revenue” in its October financial release. It observed a 2% growth in Surface revenue, or devices revenue presently. However, Microsoft foresaw a significant decline in devices revenue of almost 30% in its next results, which are expected on Tuesday. Microsoft predicted a Windows OEM revenue loss in the mid 30 percent range for its fiscal Q2 2023 results in addition to this devices revenue impact. As Nadella sees it, some divestiture is thus necessary.

Microsoft’s HoloLens Department is Currently Witnessing a Downturn

The difficulties Microsoft has had with HoloLens over the last year have also been well-documented, notably when Alex Kipman, the previous HoloLens head, left the organization amid claims of misconduct. Microsoft purportedly abandoned plans for a HoloLens 3, but the company recently signaled that, at the appropriate moment, it would deliver a “meaningful update” to the gear.

Microsoft HoloLens in action | Image: US Army

HoloLens is now a part of Microsoft’s hardware portfolio changes after Congress rejected the Army’s proposal to purchase up to 6,900 headsets based on HoloLens technology. After the US Army failure, according to Bloomberg, today’s employment layoffs have affected the HoloLens division.

Microsoft could be considering alterations to its Surface range in addition to HoloLens. Microsoft’s Surface Hub 2 was created for a futuristic workplace, but the epidemic soon arrived. Promptly, Microsoft reacted by postponing the release of its exclusive Surface Hub 2X processor upgrade cartridge and even Windows 10X devices like the Surface Neo.

Microsoft’s Surface Lineup is Expected to be a Victim of Cost-Cutting

Microsoft is reportedly said to have abandoned plans for a Surface Duo 3 with two screens. According to reports, the software developer is switching to a completely foldable design and may have even been testing out more conventional slab smartphone designs that may be released as a Surface phone-like device. There is a potential that a conventional Surface phone won’t be released if Nadella’s modifications to the hardware portfolio are significant.

Cuts to hardware are not exclusive to Microsoft. After combining certain teams and initiatives, Amazon, its main cloud competitor, reduced positions in its devices and services business late last year. When Microsoft releases its financial results the following week, we’ll probably learn more about the company’s hardware upgrades.


Muhammad Zuhair

Passionate about technology and gaming content, Zuhair focuses on analysing information and then presenting it to the audience.
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