Friday’s news of a major shake-up at Microsoft’s Xbox division caught the gaming world by surprise. Phil Spencer, who has run Xbox for almost 12 years, announced his retirement, effective immediately—just months after Microsoft insisted he was “not retiring anytime soon.”

Asha Sharma, the president of Microsoft’s CoreAI product, was tapped to run the division. Once a powerhouse earner, Xbox has seen its profitability and influence shrink in recent years. (Xbox president Sarah Bond, long seen as Spencer’s heir........

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