Microsoft is aiming to vault itself into the upper echelon of video games with its $68.7 billion deal to larn Activision Blizzard, the gaming behemothic behind such franchises every bit
Warcraft, Diablo,
Overwatch,
Phone call of Duty
and
Candy Trounce.
Announced Tuesday forenoon, information technology would be the largest acquisition in the Redmond visitor’s history, eclipsing its $26 billion purchase of LinkedIn in 2017. Adding to its existing Windows PC and Xbox gaming businesses, Microsoft says it will get the third-largest gaming company by revenue, behind Tencent and Sony.
“Today, we face strong global competition from companies that generate more than revenue from game distribution than we practise from our share of games sales and subscriptions,” said Microsoft CEO Satya Nadella on a call with investors and analysts Tuesday morning. “Nosotros need more innovation and investment in content creation and fewer constraints on distribution.”
Activision Blizzard, based in Santa Monica, Calif., will bring Microsoft some of the nigh iconic franchises in mod gaming, 10,000 employees, and a recent spate of revelations of sexual harassment and other workplace misconduct.
Bobby Kotick, Activision Blizzard CEO, will keep to serve in that function, Microsoft said. After the deal closes, Activision Blizzard volition report to Phil Spencer, who will accept the new title of CEO of Microsoft Gaming.
Update:
A Microsoft representative clarified that the statement referring to Kotick continuing to serve every bit CEO was a reference to the period from now until the bargain closes, in which Microsoft and Activision Blizzard will go on to operate separately. The company isn’t commenting on leadership plans beyond that.
Under the all-greenbacks deal, Microsoft will pay $95 per share of Activision stock, a 45% premium to Activision Blizzard’s January. 14 share price. Microsoft says it expects the deal to close in its 2023 fiscal year, which begins in July of this calendar year.
Activision Blizzard was on track for $eight.7 billion in net revenue for 2021 as of November, up from $8.1 billion in 2020.
Microsoft’s gaming revenue rose 33% to $15.4 billion in its 2021 fiscal yr, which concluded in June.
Consumer spending on video games reached a record $sixty.four billion terminal year, up 8% from 2020, according to data published today by the NPD Group research firm. Activision Blizzard’s
Call of Duty: Vanguardand Phone call of Duty: Black Ops: Cold Warwere the tiptop-selling video games in the U.S. final year.
The annunciation comes a week after Take-Two Interactive announced a $12.7 billion bargain to acquire mobile game maker Zynga, promising to combine the companies behind
Grand Theft Auto
and
FarmVille.
“Mobile is the biggest category of gaming, and information technology’s an area where we’ve not had a major presence earlier this transaction,” Spencer said. Activision acquired King, the
Processed Crush
maker, for $v.9 billion in 2015.
The improver of Activision Blizzard too promises to bolster Microsoft’due south Game Pass subscription service. Later the deal is completed, Microsoft “will offer equally many Activision Blizzard games as we can within Game Pass,” including new titles and games from the company’south back itemize, Spencer said.
Microsoft’s deal to acquire Activision Blizzard comes nigh a year later on Microsoft’south $7.five billion acquisition of ZeniMax Media, the Maryland-based belongings company for the video game publisher Bethesda Softworks, the company behind such games every bit
Doom, Fallout, Elder Scrolls,and the
Wolfensteinseries.
On the call Tuesday morning, Nadella besides addressed Activision’s challenges with misconduct, saying that creating a healthy corporate civilization is his top priority, requiring a mindset of continuous improvement.
“This is hard work,” Nadella said. “It requires consistency, delivery, and leadership that not but talks the talk but walks the walk. That’s why we believe it’southward critical for Activision Blizzard to drive forward on its renewed cultural commitments.”
Activision Blizzard reached a consent decree with the U.Due south. Equal Opportunity Employment Division in November 2021.
Just last calendar week, Microsoft’due south board hired an outside police firm to review the company’s ain sexual harassment and gender discrimination policies and practices, including its handling of by allegations against Microsoft co-founder Beak Gates, in response to a shareholder resolution that passed overwhelmingly in the fall.
Amidst the big U.S. tech companies, Microsoft may be in a unique position to make major acquisitions such as this right now.
“From a regulatory perspective, MSFT is not under the same level of scrutiny as other tech stalwarts (Amazon, Apple, Facebook, Google) and ultimately Nadella saw a window to make a major bet on consumer while others are caught in the regulatory spotlight and could not go later on an asset like this,” said Wedbush annotator Dan Ives in a note on the deal.
Microsoft had more than $130 billion in cash and short-term investments as of Sept. xxx. Its market value is about $2.iii trillion. Microsoft stock was down slightly, less than 1%, to about $308 per share in early trading Tuesday morning, following the announcement of the Activision Blizzard deal.
Activision Blizzard is scheduled to report its 4th quarter and year-terminate results on February. 3. Microsoft reports its fiscal second quarter results next week, on Jan. 25.
GeekWire’s Taylor Soper and John Cook contributed to this report.
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