Figure: Figure worm
Source: 21tech
Author: Poplar
Editor: Li Qingyu
The record for the highest scale of mergers and acquisitions in the technology industry is being rewritten.
On the evening of January 18, Beijing time, Microsoft officially announced that it would acquire well-known game developer Activision Blizzard for $95 per share, and the entire transaction value was as high as $68.7 billion.
This not only set a new record for the scale of Microsoft's mergers and acquisitions, but also broke the highest record in the technology industry. Previously, Microsoft's largest acquisition was linkedIn for $26.2 billion in 2016, while the industry's largest acquisition was Dell's $67 billion acquisition of EMC in 2016.
There is no doubt that Microsoft, with a history of 47 years of development, has once again become the focus of the world's attention.
Old and strong Microsoft
If all you can think of when you think of Microsoft is Bill Gates and Windows, you're missing out on a lot of great stories about Microsoft.
At present, Microsoft is in the era of "Nadella". In 2014, Satya Nadella became Microsoft's third CEO. After he took office, he began a series of reforms to Microsoft, including revising the company's mission statement and adjusting the company's corporate culture.
In business, Nadella is taking "mobile first, cloud first" as Microsoft's core strategy. It is under Nadella's leadership that Microsoft's market capitalization has repeatedly reached new highs over the past few years.
As of the close of the U.S. stock market on January 8, Microsoft's stock price was $302.65 per share, with a market capitalization of $2.27 trillion, making it the world's second-largest technology company after Apple. Microsoft's current stock price has increased by about 13.75 times compared with the beginning of 2014.
In fiscal 2021, Microsoft's full-year revenue was $168 billion, an increase of 18% year-over-year, and net profit attributable to the company's shareholders was $61.271 billion, an increase of 38.37% year-on-year. Specifically, Microsoft's current business includes three directions, namely productivity and business processes, intelligent cloud, and personal computing.
Activision Blizzard, which is acquired, will be included in the personal computing sector. This section includes Windows, hardware devices, games, and search advertising.
In fact, if you comb carefully, you will find that Microsoft's business territory is already very large, and this is not unrelated to Nadella's habit of liking large-scale mergers and acquisitions. For example, in 2016, Microsoft acquired LinkedIn for $26.2 billion; in 2018, it acquired GitHub for $7.5 billion, etc., which helped Microsoft open up new businesses.
As of June 30, 2021, Microsoft had cash, cash equivalents, and short-term investments totaling $130.3 billion. Sufficient cash reserves have also laid the foundation for Microsoft to continue mergers and acquisitions.
Blizzard "Reborn"
After the news of Microsoft's acquisition of Activision Blizzard, a game industry analyst told 21st Century Business Herald that for Microsoft, the acquisition of Blizzard is obvious to supplement the game content, and for Activision Blizzard, integrating into Microsoft is also a good way out.
In the past, there was a saying in the game circle that "Blizzard is produced, it must be a boutique". Judging from Activision Blizzard's existing product matrix, it is true that many products loved by players have been released, but Blizzard's ability to produce explosive products has disappeared in the past two years.
Starting with the departure of Blizzard CEO McMohan in 2018, Blizzard has seen a large number of employee departures, including Jeff Kaplan, designer of Products such as World of Warcraft and Overwatch, and the news that Blizzard announced at the end of last year that Diablo 4 and Overwatch 2 will be greatly postponed, which has made gamers start to lose confidence in Blizzard.
To make matters worse, within Activision Blizzard, there were incidents about sexual harassment scandals. In July 2021, California regulators filed a lawsuit against Activision Blizzard, alleging sexual harassment and gender pay differentials.
Although Microsoft said in the announcement, Activision Blizzard's current CEO Bobby Kotick will continue to lead the team and report to Microsoft Game CEO Phil Spencer. However, some media sources have learned that Bobby Kotick is expected to leave after the transaction is completed.
Previously, nearly one-fifth of Activision Blizzard employees reportedly signed a petition demanding Bobby Kotick's resignation. This also forced Microsoft to re-evaluate its relationship with Activision Blizzard.
However, judging from Microsoft's formal acquisition announcement, it is ready to deal with the complex internal problems of Activision Blizzard. In fact, rather than management issues, Microsoft is obviously more focused on Blizzard's accumulation and potential in the field of games.
Phil Spencer also said on the M&A call that the deal is not seeking short-term financial returns. Microsoft saw Activision Blizzard's product roadmap and was confident in them. Through the transaction, Activision Blizzard will be able to bring IP, talent and players to Microsoft Games, which will drive the development of Microsoft cloud games, mobile games and subscription services.
Microsoft CEO Nadella said that Microsoft is investing heavily in world-class content, communities and the cloud to usher in a new era of gaming that puts players and creators first.
The third largest game company in the world
Regarding Microsoft's gaming business, it can be traced back to the time when Microsoft's second CEO first took office. In early 2001, Bill Gates handed over the CEO position to Steve Ballmer, and at the end of the same year, Microsoft released the Xbox, officially entering the console market.
However, in the years that followed, Xbox's performance has been tepid, and some products have even had some product problems during this period. But even so, Microsoft's two CEOs are very consistent in their attitude towards the game business, and even Nadella's investment in games is more determined.
In 2014, as soon as Nadella became CEO of Microsoft, he acquired Swedish game company Mojang for $2.5 billion, pocketing the best-selling game Minecraft. Later, in 2020, Microsoft acquired the game company ZeniMaxMedia for $7.5 billion, which has a number of games in different genres, including the Elder Scrolls, Rogue Warriors and Fallout series.
After the acquisition of Activision Blizzard, Microsoft will receive the company's "Warcraft", "Diablo", "Overwatch", "Call of Duty" and "Candy Crush Saga" and many other famous game products.
Microsoft says there are 3 billion gamers worldwide, especially driven by a new generation of immersive interactive entertainment, which has now become the world's largest and fastest-growing form of entertainment. Through this acquisition, it will accelerate the growth of Microsoft's gaming business in the mobile, PC, console and cloud fields, which will also lay the foundation for the meta-universe.
In addition, Microsoft also stressed that the acquisition will strengthen its Xbox Game Pass portfolio. It is reported that Xbox Game Pass is a game service launched by Microsoft, and players can play all the games in Microsoft's game library after paying a certain monthly fee.
Previously, the Xbox Game Pass subscribers have reached 25 million, and next, Activision Blizzard's games will also be added to the Xbox Game Pass's game library.
Microsoft said, "With Activision Blizzard's nearly 400 million monthly active players and $3 billion franchise in 190 countries and regions, this acquisition will make Xbox Game Pass the most compelling platform in the industry and the most diverse platform for game content."
In the conference call, Nadella also said that Microsoft's vision is to create an environment where game content and business flow freely, so that people can access at any time and promote the revival of the game industry. The acquisition of Activision Blizzard allows Microsoft to accelerate the integration of the digital world and the physical world, so that the metaverse can land as soon as possible.
With regard to the metaverse, Nadella said, "We firmly believe that it will not have a single, concentrated metacosm." So we need to use applications such as game content, coupled with appropriate commercialization means, to support many metaversymic platforms."
In Nadella's view, in the game, the metaverse is a collection of communities and virtual identities, which is based on the game IP and can be accessed across platforms. "Microsoft acquired Activision Blizzard to combine games, new technologies, communities and business models to advance the metaverse."
The deal has now been approved by microsoft and Activision Blizzard's board of directors and is expected to close in fiscal year 2023. After the completion of the transaction, Microsoft will have 30 game development studios, at which time, Microsoft will become the world's third largest game company by revenue after Tencent and Sony.
Editor: Lu Taoran