Microsoft is the dominant force in business software and is a giant player in cloud computing. However, the company has now made clear that its ambitions are even bigger and powerhouse video game player Activision Blizzard is what they want.
In a move that seemingly came out of the blue, Microsoft has announced that it will acquire Activision Blizzard in an all-cash transaction valued at $68.7billion. The deal would not only catapult the company into a leading spot in both the video game industry but also strengthen its hand in the nascent world of virtual and augmented reality. It is meant to position the company for the next generation of the internet
Activision makes major hits like Call of Duty and Candy Crush. The takeover would make Microsoft the world’s third-largest gaming company by revenue, behind Tencent and Sony. The deal could also give Microsoft a significant boost against Facebook, which is considered the leader in the so-called metaverse, the name given to the virtual world.
“Our vision of the metaverse is based on intersecting global communities rooted in strong franchises,” said Phil Spencer, vice president of gaming at Microsoft. “A big part of that is the fact that mobile is the biggest category of gaming, and it’s an area where we have not had a major presence before.”
In buying Activision, Microsoft gets access to some of the most popular and recognizable titles, most notably Call of Duty, World of Warcraft, Overwatch, Diablo and Candy Crush. Activision’s recent profits have been split fairly evenly across its three subsidiaries, with the Candy Crush-maker King pulling in the most money, $303 million in operating income, in its most recent quarterly earnings report. However, Activision’s gaming efforts are also facing headwinds, with its most recent Call of Duty released panned by gamers and delays among titles like Diablo and Overwatch.
Microsoft plans to add Activision Blizzard titles to its subscription service, which already has 25 million subscribers. Phil Spencer, CEO of Microsoft Gaming, writes that the plan is to offer “as many Activision Blizzard games as we can” on the Xbox and PC Game Passes, including current and new titles. This will also accelerate the growth of Xbox Cloud Gaming.
The takeover is likely to be among the biggest announced this year, continuing a boom in the mergers business. Last year, $5.8 trillion worth of deals were struck, breaking the previous record by $1 trillion. The companies embraced acquisitions as a way to grow their businesses.
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