Microsoft buys troubled gaming powerhouse Activision.
The all-cash deal will give the Xbox 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 in the coming months, it also 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. That was addressed Tuesday by Microsoft CEO Satya Nadella 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.”
Activision’s longtime CEO Bobby Kotick will retain his role. Microsoft said he and his team will maintain their focus on driving efforts to further strengthen the company’s culture and accelerate business growth.
Wall Street saw the acquisition as a big win for Activision Blizzard Inc. and its shares soared 25% in afternoon trading Tuesday, making up for losses over the past six months since California’s discrimination lawsuit was filed. Shares of Microsoft slipped about 2%.
Last year, Microsoft spent $7.5 billion to acquire ZeniMax Media, the parent company of video game publisher Bethesda Softworks, which is behind popular video games The Elder Scrolls, Doom and Fallout. Microsoft’s properties also include the hit game Minecraft after it bought Swedish game studio Mojang for $2.5 billion in 2014.
The Redmond, Washington, tech giant said the latest acquisitions will help beef up its Xbox Game Pass game subscription service while also accelerating its ambitions for the metaverse, a collection of virtual worlds envisioned as a next generation of the internet.
The acquisition also 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. “They’re the only game in town that can do a deal of this size with the other tech stalwarts under massive tech scrutiny.”
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 will also likely put Microsoft into the regulatory spotlight, 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.
Microsoft is able to make such a big all-cash purchase of Activision because of its success as a
cloud computing provider. But after years of focusing on shoring up its business clients and products such as the Office suite of email and other work tools, Ives said Microsoft’s failed 2020 attempt to acquire social media platform TikTok may have “really whet the appetite for Nadella to do a big consumer acquisition.”
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.