New Delhi, July 6 -- Microsoft Corp.'s gaming division, Xbox, is set to cut around 3,200 jobs, roughly one-fifth of its workforce, over the next year as part of a sweeping restructuring aimed at reviving the business. The reorganisation will also involve the sale of four video game development studios, while the company has begun the process of separating from a fifth.

Announcing the overhaul in a message to employees on Monday, Xbox Chief Executive Officer Asha Sharma acknowledged the challenges facing the division. "Our business today is not healthy," she wrote, adding that Xbox's profit margins were three to ten times lower than those of comparable businesses. "We must reset Xbox."

According to the communication, 1,600 employees will...