Microsoft starts a new round of job cuts and the next phase of its Xbox 'reset.' Read the memo.

Microsoft began a new round of layoffs on Tuesday, affecting around 500 employees, primarily in its Xbox gaming division, and a small number of roles in other units like cloud + AI.

The cuts are the latest step in Microsoft's effort to slim down its gaming business after years of expansion and big acquisitions. Xbox is working through a plan to eliminate roughly 20% of its workforce by the end of Microsoft's fiscal year, while reorganizing studios and deciding which businesses it still wants to own.

The latest developments in Xbox's "reset" include cutting 268 gaming roles, reorganizations of Xbox's studio groups, and updates on its divestment plans.

Microsoft's severance package in July offered laid-off US employees up to 39 weeks' base pay for most US employees with a minimum of 60 days plus additional time based on seniority and tenure, according to documents reviewed by Business Insider.

I'm writing to share several updates as part of the XBOX reset outlined earlier this year.

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Second, we are reorganizing our studios. The goal is to strengthen our franchises and games by operating fewer business units, aligning groups that already work closely together, and focusing our publishing expertise.

Activision will expand its remit to World's Edge, as well as Rare. Activision will also be developing the next Halo title, led by a new, purpose-built team that is separate from ongoing development and plans for Call of Duty. A small team at Halo Studios will continue supporting the Halo community and games in-market.

King will expand its remit to include Microsoft Casual Games, uniting our two global leaders in casual game design and live operations.

Third, an update on our studio divestitures: In August, Compulsion and Double Fine returned to management with their IP, back catalogs, and runway funding. Undead Labs has now successfully transitioned on similar terms and, with a new publisher, will release State of Decay 3 day one on Game Pass. Unfortunately, two separate agreements for Ninja Theory fell through. We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward. Consultation with Arkane remains underway and is expected to continue through the end of the year.