Times are starting to get tough for Tesla. The electric vehicle automaker had been riding high, with quarter after quarter of successive growth and plenty of profits in the process. But lately, that success has mostly been due to a series of price cuts meant to tempt customers to buy into an aging lineup. This March, the company reported its first quarterly decline since 2020.
“As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity,” Tesla CEO Elon Musk told employees in the memo.
Musk has pursued a strategy of relentless cost-cutting, but all those price cuts have meant Tesla’s once-envied profit margins are now nothing special.
“As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10 [percent] globally. There is nothing I hate more, but it must be done. This will enable us to be lean, innovative, and hungry for the next growth phase,” Musk wrote.
Tesla’s limited aging product portfolio is starting to become a problem in the face of stiff competition in China. Its newest vehicle is the Cybertruck, a large and controversial pickup with limited appeal outside of North America’s wide roads and parking spaces. And plans for a cheap two-seat Model 2 have been axed in favor of a robotaxi.
Enlarge/ Adam Jensen of Deus Ex: Mankind Divided, taking in the news that no last-minute contrivance is going to save his series from what seemed like inevitable doom. (Pun credit to Andrew Cunningham).
Eidos Interactive
Embracer Group, the Swedish firm that bought up a number of known talents and gaming properties during the pandemic years, has canceled a Deus Ex game at its Eidos studio in Montreal, Canada, according to Bloomberg’s Jason Schreier.
The game, while not officially announced, has been known about since May 2022. It was due to enter production later in 2024 and had seen two years of pre-production development, according to Schreier’s sources. Many employees will be laid off as part of the cancellation.
Embracer Group acquired Eidos Montreal, along with Crystal Dynamics and Square Enix Montreal, for $300 million in mid-2022, buying up all of Japanese game publisher Square Enix’s Western game studios. That gave Embracer the keys to several influential and popular series, including TombRaider, Just Cause, Life Is Strange, and Deus Ex.
Eidos published the first Deus Ex from developer Ion Storm, founded by id Software’s John Romero and Tom Hall. Gaming legend Warren Spector oversaw the development of the original Deus Ex, merging shooters, stealth, and open-world RPG game mechanics in a way that, for the year 2000, was wholly original. The game is often cited as one of the best PC games of all time and a progenitor of many immersive sims and RPG-inflected shooters to come.
Eidos Interactive was acquired in 2009 by Square Enix and became the primary developer of the Deus Ex series, starting with Deus Ex: Human Revolutionin 2011. The last full-fledged title in the series was Deus Ex: Mankind Dividedin 2016. Despite selling more than 14 million units across the series’ lifetime, and the perennial hunger by fans and critics to see a return to the series’ novel storytelling and sharp critique of mega-corp control, the reset button has been hit by a rather large corporation.
Enlarge/ Blizzard shared this image teasing a now-cancelled game in 2022.
Blizzard Entertainment/Twitter
The survival game that Blizzard announced it was working on in January 2022 has reportedly been canceled. The cut comes as Microsoft is slashing jobs a little over four months after closing its $69 billion Activision Blizzard acquisition.
Blizzard’s game didn’t have a title yet, but Blizzard said it would be for PC and console and introduce new stories and characters. In January 2022, Blizzard put out a call for workers to help build the game.
The game’s axing was revealed today in an internal memo from Microsoft Gaming CEO Phil Spencer seen by publications including The Verge and CNBC that said:
Blizzard is ending development on its survival game project and will be shifting some of the people working on it to one of several promising new projects Blizzard has in the early stages of development.
Spencer said Microsoft was laying off 1,900 people starting today, with workers continuing to receive notifications in the coming days. The layoffs affect 8.64 percent of Microsoft’s 22,000-employee gaming division.
Another internal memo, written by Matt Booty, Microsoft’s game content and studios president, and seen by The Verge, said the layoffs are hitting “multiple” Blizzard teams, “including development teams, shared service organizations and corporate functions.” In January 2022, after plans for the merger were first announced, Bobby Kotick, then-CEO of Activision Blizzard, reportedly told employees at a meeting that Microsoft was “committed to trying to retain as many of our people as possible.”
Spencer said workers in Microsoft’s Xbox and ZeniMax Media businesses will also be impacted. Microsoft acquired ZeniMax, which owns Bethesda Softworks, for $7.5 billion in a deal that closed in March 2021.
After a bumpy ride with global regulators, Microsoft’s Activision Blizzard purchase closed in October. Booty’s memo said the job cuts announced today “reflect a focus on products and strategies that hold the most promise for Blizzard’s future growth, as well as identified areas of overlap across Blizzard and Microsoft Gaming.”
He claimed that layoffs would “enable Blizzard and Xbox to deliver ambitious games… on more platforms and in more places than ever before,” as well as “sustainable growth.”
Spencer’s memo said:
As we move forward in 2024, the leadership of Microsoft Gaming and Activision Blizzard is committed to aligning on a strategy and an execution plan with a sustainable cost structure that will support the whole of our growing business. Together, we’ve set priorities, identified areas of overlap, and ensured that we’re all aligned on the best opportunities for growth.
Laid-off employees will receive severance as per local employment laws, Spencer added.
Additional departures
Blizzard President Mike Ybarra announced via his X profile today that he is leaving the company. Booty’s memo said Ybarra “decided to leave” since the acquisition was completed. Ybarra was a top executive at Microsoft for over 20 years, including leadership positions at Xbox, before he started working at Blizzard in 2019.
Blizzard’s chief design officer, Allen Adham, is also leaving the company, per Booty’s memo.
The changes at the game studio follow Activision Blizzard CEO Bobby Kotick’s exit on January 1.
Microsoft also laid off 10,000 people, or about 4.5 percent of its reported 221,000-person workforce, last year as it worked to complete its Activision Blizzard buy. Microsoft blamed those job cuts on “macroeconomic conditions and changing customer priorities.”
Today’s job losses also join a string of recently announced tech layoffs, including at IBM, Google, SAP, and eBay and in the gaming community platforms Unity, Twitch, and Discord. However, layoffs following Microsoft’s Activision Blizzard deal were somewhat anticipated due to expected redundancies among the Washington tech giant’s biggest merger ever. This week, Microsoft hit a $3 trillion market cap, becoming the second company to do so (after Apple).
Enlarge/ Exterior view of a Googleplex building, the corporate headquarters of Google and parent company Alphabet, May 2018.
Google/Alphabet CEO Sundar Pichai wasn’t kidding when, earlier this month, he said more layoffs are coming. The latest group to be hit is Alphabet’s X Lab, which is losing “dozens of employees,” according to a new report from Bloomberg. This is something like the 11th Google layoff announcement we’ve covered in the past 12 months and the fourth one this month.
The X Lab is Alphabet’s “moonshot” experimental group, which is responsible for wild concepts like a wearable head-up display, a self-driving car, smart contact lenses, flying Internet balloons, and delivery drones. This is the age of Google cost-cutting, and you’ll notice none of those projects is a rip-roaring commercial success. On Google’s financials, the X Lab is part of Alphabet’s “Other Bets” group, which burns through around a billion dollars every quarter. It’s a research arm, so the hope is that spending all this money will someday lead to new revenue streams. For the short-term Wall Street types, though, it’s a money loser, quarter to quarter, and that makes it a prime candidate for cuts.
Bloomberg has a copy of the memo announcing the cuts to the X Labs staff, and there’s more in there than just layoffs. X Lab CEO Astro Teller writes: “We’re expanding our approach to focus on spinning out more projects as independent companies funded through market-based capital. We’ll do this by opening our scope to collaborate with a broader base of industry and financial partners, and by continuing to emphasize lean teams and capital efficiency.” Basically, Google wants these money losers to find their own funding somewhere else, at least partially.
The “outside funding” model isn’t new for some of Alphabet’s biggest and most promising “Other Bets” projects. The self-driving car company, Waymo, took rounds of outside funding in 2020 and 2021, racking up over $5 billion of cash that didn’t come from the Google Ads money geyser. Verily, Alphabet’s health care data analytics company, has also raised billions in outside funding. Both groups started as X projects and later “graduated” to full-fledged Alphabet companies. Others, like Project Loon (Internet balloons) and Sidewalk Infrastructure Partners (infrastructure planning), were X or Alphabet companies and were spun out as fully independent entities, separate from the Alphabet earnings sheet. Apparently, Alphabet wants to push X projects down one of those two paths.
On one hand, outside funding will result in a tougher, more critical eye for some of these projects. On the other hand, the Bloomberg report notes that “Alphabet could only accommodate so many Other Bets, creating a bottleneck for X ventures that were ready to take the next step, according to one of the people with knowledge of the matter. Startups within X often faced a choice between waiting for a spot to open up or striking out on their own.”
Enlarge/ Google is looking pretty dilapidated these days.
Aurich Lawson
Today’s Google layoff announcement concerns YouTube, which plans to lay off 100 employees. Tubefilter was the first to report the news. This is the third Google layoff announcement in eight days (the other two were at Google Assistant/Hardware and Google Ads) and the 10th Google layoff announcement we’ve covered in the past 12 months. It feels like we could be doing this kind of reporting via a template by now.
Google CEO Sundar Pichai says to expect more layoffs. The Verge got hold of an internal memo from Pichai to Google’s remaining employees on January 10, telling them to brace for “tough choices” in the future and that “to be upfront, some teams will continue to make specific resource allocation decisions throughout the year where needed, and some roles may be impacted.” Last year Google cut 12,000 jobs in January and continued to make smaller additional cuts all year. Pichai told his employees that this year, “these role eliminations are not at the scale of last year’s reductions, and will not touch every team.”
The January 10 date of the memo means Googlers got a heads up about the Google Assistant, Hardware, Google Ads, and YouTube layoffs, but no one knows when the layoffs will stop. Making investors happy is a big factor in all these layoffs, so if you’re interested in the Wall Street perspective on Google’s headcount, back in March 2023, activist investor Christopher Hohn of TCI Fund Management wanted to see Pichai cut another 25,000 people after the 12,000 original layoffs. Hohn wants to see Alphabet/Google go back to 150,000 employees, which was the company headcount at the end of 2021.
Even after what seemed like an endless amount of layoff announcements last year, as of Q3 2023, Alphabet’s headcount was still at 182,381. Even though the company laid off over 12,000 people, it was still hiring people during that time, so year over year, Alphabet’s headcount only dropped by 4,400 people.
For years, one of Google’s big advantages was being a great workplace, with endless employee perks, 20 percent time to work on pet projects, and whimsical offices. Budget cutbacks and another year of looming layoffs will put a serious dent in the already awful morale at the company. Back when founders Larry Page and Sergey Brin introduced Google to Wall Street in an IPO founders letter, the two said: “Our employees, who have named themselves Googlers, are everything.” Page and Brin are no longer in charge, though, and the company has changed significantly since then.
Enlarge/ Google is looking pretty dilapidated these days.
Aurich Lawson
Google’s cost-cutters are still working overtime, with more layoffs this week and cuts to Google Assistant functionality.
First up, The New York Times reports Google laid off “hundreds” of workers in “several divisions” on Wednesday. Core engineering, the Google Assistant, and the hardware division all lost people. The report says that “Google said that most of the hardware cuts affected a team working on augmented reality.” AR cuts are eyebrow-raising since that’s quickly going to be one of the highest-profile teams at the company this year, as Google, Samsung, and Qualcomm team up to battle the Apple Vision Pro. FitBit was apparently also a big loser, with 9to5Google reporting that Fitbit co-founders James Park and Eric Friedman and “other Fitbit leaders” have left Google.
Over the years, Google has rarely laid off workers, but since January of last year, a new focus on cost-cutting has made layoffs a regular occurrence at Google. The purge started with an announcement of 12,000 layoffs in January, which took until at least March to complete. Then there were more layoffs at Alphabet companies Waymo and Everyday Robots in March, Waze layoffs in June, recruiting layoffs in September, Google News cuts in October, and now these layoffs in January. There are rumors of more layoffs happening this month, too, focusing on the ad sales division.
Next up is a Google blog post titled “Changes we’re making to Google Assistant,” which details 17 features that are being removed from Google’s struggling voice assistant. Google says these “underutilized” features will be “no longer supported” at some point in the future, with shutdown warnings coming on January 26.
The Google Search bar, which (depending on your local anti-trust laws) is contractually obligated to be on the front of an Android phone, will no longer bring up the Google Assistant.
Ron Amadeo
The full list of cut features—it’s a big list—is here. The biggest and most ominous news is that the Google Assistant is losing its premium, default spot on the homepage of all Android devices. The microphone button in the Google Search bar used to bring up the Assistant, but now it will only send your voice input directly to Google Search. You’ll still be able to bring up the Assistant using what are basically secret, invisible shortcuts, like saying “Hey Google” or long-pressing on the home button (if you have gesture navigation turned off), but this is a massive change that means the Assistant will no longer be front-and-center on Android phones.
The Assistant is from the Google Search division and was once considered the future of the company and the future of Google Search. If the Assistant couldn’t answer a question, it would just forward you to Google Search, so this change makes the microphone button a lot less useful. It also highlights the ongoing death of the Google Assistant, which has fallen out of favor at the company. (Android users unhappy about this should download the Google Assistant shortcut app.) Here are some of the features being removed:
The Google Assistant’s messaging feature, where voice messages would be sent to any phones and tablets in your family group, is dead. Audio messages will still play on local network speakers, but Google is no longer sending notifications across the Internet to Android and iOS.
Google Play Books voice support sounds like it will be totally gone. You can still use generic audio-cast features from another device, but you can’t ask the Assistant to play an audiobook anymore.
Setting music alarms—not regular alarms—is dead. Controlling a stopwatch—not normal timer support—is also gone.
The death of Fitbit under Google continues with the removal of voice-control activities for the Fitbit Sense and Versa 3. A wrist-based Google Assistant is exclusive to the Pixel Watch in Google’s lineup, though that probably won’t last long either.
One problem with all voice assistants is that there’s no good way to communicate the hundreds of possible voice commands to users, so there’s a good chance you didn’t know most of these exist. Figuring out whether any given Google Assistant feature is available on a phone, speaker, smart display, car, TV, or headphones is also an impossible task. Some cut features I have personally never heard of include “managing your cookbook”—apparently there is a “Google Cookbook” of saved recipes available on smart displays and nowhere else. Google says it was somehow previously possible to “send a payment, make a reservation, or post to social media” by voice on some platforms. When I ask the Google Assistant to do any of those things right now, it says “I don’t know, but I found these results on search.” I’m not even sure where you would enter payment details for the Assistant to have access to (was this some iteration of Google Pay?), or how you would connect social media accounts.
It increasingly sounds like it’s time to pick out a nice plot of land in the Google Graveyard for the Assistant. On one hand, Google seems to want to shut this one down in exchange for “Pixie,” a voice assistant that will be exclusive to Pixel devices, starting with the Pixel 9. On the other hand, just in October, Google promised the Assistant would be getting Bard generative-AI integration, so none of this lines up perfectly. It’s odd to be removing the Assistant from Android home screens, stripping it of features, planning a big revamp, and also planning a direct competitor.
When Unity laid off 265 Weta Digital engineers in November, the company warned that more layoffs would be necessary in the near future as part of a plan to “refocus” on the company’s core game engine business. A large chunk of those changes became real on Monday as the Unity Engine maker told the SEC that “it plans to reduce approximately 1,800 employee roles, or approximately 25% of its current workforce.”
“This decision was not taken lightly, and we extend our deepest gratitude to those affected for their dedication and contributions,” Unity Director of PR Kelly Ekins said in a statement to The Verge. Ekins added that the layoffs will be spread across “all teams,” and a company spokesperson told Reuters that this round of layoffs will be complete by March, with additional internal changes coming thereafter.
The massive staffing cuts come after over 1,300 layoffs already implemented across the company in multiple waves since June 2022 (including those November Weta Digital cuts). Despite that, Unity’s statement to the SEC says these further cuts are necessary “to position [the company] for long-term and profitable growth.”
Hemorrhaging money
The company’s recent financial statements show why such a drastic change is even being considered. Despite annual revenues measured in the billions, Unity has struggled to show a profit in recent years, reporting net losses of $859 million for the 12 months ending in September 2023.
Unity’s stock price, which jumped nearly 4 percent in the immediate wake of the layoff news late Monday, is back down to its lowest level since mid-December as of Tuesday morning. That stock price is currently down nearly 40 percent from its late 2020 IPO and off over 80 percent from its peak in late 2021.
But Unity stock is now up over 40 percent since interim CEO Jim Whitehurst (who was the former CEO of Red Hat) announced a “company reset” in a November shareholder letter. At the time, Whitehurst warned that Unity “will likely include discontinuing certain product offerings, reducing our workforce, and reducing our office footprint” as the company implements plans “to increase our focus on our core; the Unity Editor and Runtime, and Monetization Solutions.”
Riccitiello oversaw Unity through an expensive wave of corporate acquisitions after the company’s IPO, including cloud gaming service Parsec, mobile ad giant Ironsource, and 3D collaboration company SyncSketch, to name just a few. Those ancillary products and services may be in particular danger as Unity plans to “reduc[e] the number of things we are doing in order to focus on our core business and drive our long-term success and profitability,” as Whitehurst wrote Monday in a company memo obtained by Reuters.
Even with the massively reduced headcount and new focus on the engine business, Unity isn’t expecting its corporate fortunes to turn around any time soon. In his November investor letter, Whitehurst said, “We expect the impact of this [runtime fee] business model change to have minimal benefit in 2024 and ramp from there as customers adopt our new releases.”
