Microsoft is going to pay almost 70 billion dollars for Activision Blizzard, the publisher of mega franchises including Call of Duty, World of Warcraft and Candy Crush, in the biggest takeover in the tech and gaming sector.
Microsoft said that the $68.7 billionn 50.6 billion deal will provide the building blocks for the metaverse, surpassing the previous biggest, the $26 billion takeover of LinkedIn in 2016. It is the biggest deal in tech history, surpassing the $67 billion paid by Dell to buy the digital storage giant EMC in 2015.
The deal will see the Xbox maker become the third-biggest gaming company by revenue behind China s Tencent and Japan s Sony, maker of PlayStation games consoles.
Satya Nadella, the chairman and chief executive of Microsoft, said gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms. We are investing heavily in world-class content, community and cloud to bring a new era of gaming that puts players and creators first and makes gaming safe, inclusive and accessible to all. The deal comes after a tumultuous time for Activision Blizzard, which has 10,000 staff worldwide, has a market value of about $50 billion and three $1 billion gaming franchises that have been affected by allegations of sexual misconduct and discrimination involving senior executives.
The company has fired more than three dozen employees and disciplined another 40 since July of last year to address the allegations.
Bobby Kotick, the chief executive of Activision Blizzard, will run the gaming business, which will see the company run 30 internal games development studios when it is joined with Microsoft. Microsoft said that the company's strength in the rapidly growing mobile gaming sector was an important attraction of the deal.
Daniel Ives, a tech and media analyst at US firm Wedbush, said that while a deal of this scale will naturally draw the attention of regulators, Microsoft will gain clearance as it is not under the same scrutiny and pressure as Silicon Valley rivals such as Facebook, Amazon, Apple and Google.
"We expect this deal to be clear to regulators," said Ives, in a note to investors. There will be some inherent speed bumps navigating the Beltway and Brussels on a tech deal of this size. Ives said that while Nadella has seen huge success driving Microsoft's business-to-business offerings, such as the cloud division led by Azure and Office 365, this deal will help turbocharge its consumer strategy, which has been on a treadmill approach, and ultimately its move into the metaverse with gaming the first monetisation piece of the metaverse in our opinion. With Activision's stock under heavy pressure over the last few months, Microsoft viewed this as a window of opportunity to acquire a unique asset that can propel its consumer strategy forward. Gaming has been a big winner as the lockdowns around the world caused a boom in playing to help alleviate boredom, which in turn has resulted in a deal-making boom in the sector.
Last week, Take Two Interactive, the maker of hit video games including the Grand Theft Auto franchise, acquired Zynga, best known for its FarmVille and Harry Potter titles, in a $12.7 bn deal that created a global console and mobile gaming giant.