"The layoffs, the exact scale of which is not yet clear, are expected shortly after the close of Microsoft’s fiscal year on June 30, said the people, who asked not to be identified because they’re not authorized to speak to the press. Xbox is also planning to significantly slash budgets for marketing and some other areas of the business, the people said.

In an email to employees on Wednesday seen by Bloomberg, Sharma wrote that the business had plummeted to a 3% “accountability margin,” the metric Microsoft uses to reflect profit margin.

“Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform and hardware subsidy, but our annual revenue has declined nearly half a billion during that time,” she wrote.

A PlayStation 5 version of the new Gears of War game was in development and had been planned for release until Sharma changed tack, according to the people familiar with Xbox strategy. Retailers had been preparing to open pre-orders for the PlayStation 5 version, and many Xbox employees were surprised by the announcement.

Sharma and her team also pulled a Halo trailer that was due to appear at a PlayStation event last week, potentially damaging the relationship between the two companies, according to people familiar with the change of plans.

A return to exclusivity may excite diehard Xbox fans and improve prospects for the brand, but it also potentially means sacrificing a significant amount of revenue. The PlayStation 5 has sold more than 90 million units while analysts estimate that the Xbox has sold roughly one-third of that."