Microsoft said on Tuesday that it planned to buy the powerhouse but troubled video game company for nearly $70 billion, betting that video games will become an increasingly central part of people's digital lives.
The blockbuster acquisition by Microsoft would catapult the company into a leading spot in a $175 billion industry that is successful on virtually every kind of device, from bulky gaming consoles to mobile phones, and has reached even greater heights during the Pandemic. Technology companies are trying to get a bigger share of attention and money from the three billion people who play video games.
Call of Duty and Candy Crush are two of the most popular games made by the company. The company has been roiled by employee revolt over accusations of sexual harassment and discrimination.
The company may have a stronger hand in the metaverse, the world of virtual and augmented reality. The metaverse has attracted a lot of investment and talent, but is more of a buzzword than a thriving business. The parent company of Facebook was renamed Meta late last year.
Phil Spencer, the chief executive of Microsoft's gaming business, said that whatever the metaverse may end up being, gaming will be at the forefront of making that mainstream. He said that the acquisition was about gaining a stronghold in mobile gaming and a studio that produces blockbuster games. He said that Call of Duty was one of the best entertainment franchises on the planet.
Democrats and Republicans alike have pushed to limit the power of technology giants, which may cause federal regulators to raise concerns about the acquisition. Microsoft is worth more than Apple.
The industry spends a lot on technology. Microsoft said that the takeover would make it the third-largest gaming company by revenue. Microsoft owns studios that make hits likeMinecraft.
The arms race for exclusive content is one of the main drivers of deals. Fans of Call of Duty will have to switch to Microsoft's rival system, the Xbox, if the company decides to make those games exclusive to their platforms.
Mr. Spencer said that the goal was to allow the content to reach as many players as possible.
Microsoft has a huge cash reserve of more than $130 billion and has been looking at ways to use it to expand its consumer business.
Microsoft found a target under stress in Activision, which faces accusations that senior executives ignored sexual harassment and discrimination. Since California sued the company in July, its shares have fallen 27 percent.
The game maker's shares opened up more than 30 percent. Microsoft's shares fell.
The image is.
The employees and supporters of the company protested in Irvine, Calif., in July.
The transaction may be seen as a victory for Bobby Kotick, the long-time chief executive of the company. Microsoft is paying 95 a share, 45 percent above its stock price before the announcement, but only slightly more than the trading price before the scandal broke.
When the studio would report to Mr. Spencer, Mr. Kotick wouldn't say if he would remain chief executive.
Mr. Kotick said he would be available to ensure the best integration after close.
Last summer, a California employment agency sued the company over accusations of fostering a toxic workplace culture in which women were routinely sexually harassed and discriminated against. Employees staged protests, launched social media campaigns and called for executives to resign.
The company pledged $250 million toward increasing employee diversity and said it would strengthen anti-harassment policies. When The Wall Street Journal reported that Mr. Kotick had known for years about accusations of harassment against employees, calls for his resignation only increased.
Microsoft has changed its mind about the company's culture after doing a deal with Activision. Mr. Spencer wrote in November that he was disturbed and deeply troubled by the events and actions at the company. Mr. Kotick said that he thought the two companies had similar values and cultures.
Mr. Spencer said that Microsoft looked at the plan that they have in place and that the company culture is always a work in progress. We are very supportive of the progress that he and the team are making.
Current and former employees of the company who have been leading the effort to reform the culture did not think the purchase would prompt change in the short term.
Mr. Spencer said the deal could take up to 18 months to close.
Jessica Gonzalez, a former employee and one of the organizers of the A BetterABK activist movement, said that they will continue to fight for improvement and stress proper employee representation.
The game companies have been flush with cash since the Pandemic. The previous record for the biggest merger in the game industry was set last week, when Take-Two Interactive announced plans to buy the mobile game publisher Zynga for more than $11 billion.
Last year, Electronic Arts and Take-Two engaged in a bidding war over Codemasters, a racing game company, eventually selling toEA for $1.2 billion, and in 2020 Microsoft purchased Zenimax Media and its slate of gaming studios for $7.5 billion.
Mr. Kotick was responsible for rolling up smaller game studios. It took shape in its current form when the gaming unit of France's Vivendi agreed to combine with the company that was known for producing titles for traditional gaming consoles.
King, the European gaming company behind Candy Crush, was bought by Activision.
Mr. Kotick said that the deal was a calculation that was not enough to keep up with the changing landscape of gaming.
He said that they realized it was going to be an increasingly competitive world.
Despite owning the Xbox gaming console and the studios behind Minecraft and Halo, Microsoft has remained mostly focused on corporate users for its cloud-computing business that competes with the likes of Amazon and Google.
The recent Call of Duty release was panned by the gaming community and the company has seen key directors leave in the last few months. In its most recent quarterly earnings report, the company reported $639 million in net income.
Our daily newsletter gives you a sense of the world of deals and dealmakers. It will be sent to your inbox.
All Rights Reserved © 2024
