According to sources speaking with ZDNet's resident Microsoft blogger, Mary-Jo Foley, "the bulk of [Microsoft's] immediate 1,400-person cuts" are going to fall on the Entertainment & Devices Group. Which includes the Xbox team.
We were told the same thing earlier today, and when contacted Microsoft PR issued the following statement: "This is a company-wide action, in which every division will be affected. We cannot share any other details at this time".
The E&D Group also includes Zune and Windows Mobile, so losses would presumably be spread across all three. While we're not terribly interested in either of those, we are interested in potential cuts to the Xbox team, particularly since we've already seen two instances of that today in the sackings at Gamerscore and ACES.
If all these sources are to be believed, though, a blog and the Flight Sim guys might only be the start. We'll no doubt here more in the coming days.