Microsoft strikes deal for game-maker Activision Blizzard
Microsoft is paying nearly $70 billion for Activision Blizzard, the maker of Candy Crush and Call of Duty, to boost its competitiveness in mobile gaming and virtual reality technology.
The all-cash $68.7 billion deal will turn Microsoft, maker of the Xbox gaming system, into one of the world’s largest video game companies. It will also help it compete with tech rivals such as Meta, formerly Facebook, in creating immersive virtual worlds for both work and play.
If the deal survives scrutiny from U.S. and European regulators, it could be one of the biggest tech acquisitions in history. Dell bought data storage company EMC in 2016 for around $60 billion.
Activision has been buffeted for months by allegations of misconduct and unequal pay. Microsoft CEO Satya Nadella addressed the issue Tuesday in a conference call with investors.
“The culture of our organization is my No. 1 priority,” Nadella said, adding that “it’s critical for Activision Blizzard to drive forward” on its commitments to improve its workplace culture.
Activision disclosed last year it was being investigated by the Securities and Exchange Commission over complaints of workplace discrimination and in September settled claims brought by U.S. workforce discrimination regulators. California’s civil rights agency sued the Santa Monica-based company in July, citing a “frat boy” culture that had become a “breeding ground for harassment and discrimination against women.”
Wall Street saw the acquisition as a big win for Activision Blizzard Inc., and its shares soared 25 percent in trading Tuesday, making up for losses over the past six months since California’s discrimination lawsuit was filed. Shares of Microsoft slipped about 2 percent.
The Redmond, Washington, tech giant said the latest acquisitions will help beef up its Xbox Game
Pass subscription service while accelerating its ambitions for the metaverse, a collection of virtual worlds envisioned as a next generation of the internet. While Xbox already has its own game-making studio, the prospect of Microsoft controlling so much game content raised questions about whether the company could restrict Activision games from competing consoles although. But Nadella promised the deal would help people play games “wherever, whenever and however they want.”
The acquisition would push Microsoft past Nintendo as the third-largest video game company by global revenue, behind Playstation-maker Sony and Chinese tech giant Tencent, according to Wedbush Securities analyst Daniel Ives.
“Microsoft needed to do an aggressive deal given their streaming ambitions and metaverse strategy,” Ives said.
Meta, Google, Amazon and Apple have all attracted increasing attention from antitrust regulators in the U.S. and Europe, but the Activision deal is so big that it is likely to put Microsoft into the regulatory spotlight as well, Ives said. Microsoft is already facing delays in its planned $16 billion acquisition of Massachusetts speech recognition company Nuance because of an investigation by British antitrust regulators.
Pushback against the deal was immediate from consumer advocacy groups.
“No way should the Federal Trade Commission and the U.S. Department of Justice permit this merger to proceed,” said a statement from Alex Harman, competition policy advocate for Public Citizen. “If Microsoft wants to bet on the ‘metaverse,’ it should invest in new technology, not swallow up a competitor.”
White House press secretary Jen Psaki had no comment on Microsoft’s announcement at her briefing Tuesday but emphasized the Biden administration’s recent moves to strengthen enforcement against illegal and anticompetitive mergers.
Microsoft said it expects the deal to close in its 2023 fiscal year, which starts in July. It said Kotick will continue to serve as CEO. After the deal closes, the Activision business unit would then report to Phil Spencer, who has led Microsoft’s Xbox division and will now serve as CEO of Microsoft Gaming.