Bloggers at Fudzilla said in late December that mass layoffs were imminent, although a more recent post said much of the cuts would be made to agency staff, or contractors.
In an e-mail to Edge, a Microsoft spokesperson stopped short of denying the report, stating the company "does not provide comment on rumor and speculation." He did not offer any color on how the games division could possibly be affected.
However, a report from CNBC quoted an unnamed Microsoft source who said speculation surrounding the layoffs is "grossly exaggerated," although he admitted, "any company not paying careful attention to headcount in a climate like this is nuts."
Microsoft's website says the company currently employs 94,286 workers.
CNBC speculated that Microsoft's slowing browser business could be a target of further layoffs, as competition from Google Chrome, Mozilla Firefox and Apple's Safari have taken share from Internet Explorer.
Industry watchers expect some kind of cost-cutting initiative to be announced on or before Microsoft's Q2 earnings release on January 22.