According to the Associated Press, Microsoft will spend nearly $70 billion to acquire Activision Blizzard, the developer of games like Candy Crush and Call of Duty.
The deal would immediately make Microsoft a video game company larger than Nintendo, while also raising questions about the possible counter-competitive effects of the deal.
The $68.7 billion all-cash deal will make Microsoft, maker of The Xbox gaming system, one of the world's largest video game companies. It will also help compete with technological rivals such as Meta (formerly Facebook) when it comes to creating immersive virtual worlds for work and play.
If the deal survives scrutiny by U.S. and European regulators in the coming months, it could become one of the largest tech acquisitions in history. In 2016, Dell spent about $60 billion to acquire data storage company EMC.
Activision has been accused of misconduct and unequal pay for months. Microsoft CEO Satya Nadella spoke about the issue on a conference call with investors on Tuesday.
Nadella said, "The culture of our company is my top priority. He added, "For Activision Blizzard, advancing the commitment to improving workplace culture is critical." ”
Activision disclosed last year that it was under investigation by the U.S. Securities and Exchange Commission into workplace discrimination complaints and reached a settlement with U.S. labor discrimination regulators in September. In July, California civil rights agencies sued the Santa Monica-based company (Activision Blizzard), saying its "brotherhood" culture had become a "hotbed of harassment and discrimination against female employees."
Wall Street saw the acquisition as a major victory for Activision Blizzard Inc., whose shares surged 25 percent on Tuesday to make up for losses over the past six months since California filed a discrimination lawsuit. Microsoft shares fell about 2 percent.
Last year, Microsoft spent $7.5 billion to acquire ZeniMax Media, the parent company of video game publisher Bethesda Softworks, the developer of popular video games The Elder Scrolls, Doom and Fallout.
Microsoft's gaming assets also include the hit game Minecraft, in which Microsoft acquired Swedish game studio Mojang (the developer of Minecraft) for $2.5 billion in 2014.
The Redmond, Washington-based tech giant says the latest acquisition will help enhance its Xbox Game Pass game subscription service, while also accelerating its ambitions to achieve a "metaverse."
The "metacosm" refers to a series of virtual worlds that are seen as the next generation of the Internet. While Xbox already has its own game-making studio, the prospect of Microsoft controlling so much of the game content raises questions about whether Microsoft can limit Activision's gaming to rival gaming platforms, despite Nadella's promise that the deal will help people play "at any time, anywhere, any way."
Daniel Ives, an analyst at Wedbush Securities, said the acquisition would allow Microsoft to overtake Nintendo as the world's third-largest video game company by revenue, behind Playstation maker Sony of Japan and Chinese tech giant Tencent.
Ives said, "Given Microsoft's ambitions in streaming and the market strategy of the metacosm, they need to make an aggressive deal." "Under a lot of technical scrutiny, Microsoft is probably the only company that can reach such a large deal with other tech stalwarts."
Meta, Google, Amazon and Apple have all attracted increasing attention from antitrust regulators in the United States and Europe, but Activision's deal is so large that it could also put Microsoft in the spotlight.
For example, Microsoft's plan to buy Massachusetts-based speech recognition company Nuance for $16 billion has been delayed due to an investigation by the U.K.'s antitrust regulator.
Microsoft was able to buy Activision for all-cash because Microsoft is a successful cloud computing provider. But Ives said Microsoft has been focusing on products like the Office suite, which supports its commercial customers as well as email and other work tools, after failing to try to acquire social media platform TikTok in 2020, which may have "really sparked Nadella's desire for a massive acquisition."
However, the deal was quickly opposed by consumer advocacy groups. Alex Harman, a competition policy advocate for the American Public Citizens Group, said in a statement that "the FTC and the Justice Department will never allow this merger to proceed," and that if Microsoft wants to bet on metacosm, it should invest in new technologies rather than annex competitors." ”
White House press secretary Jen Psaki did not comment on Microsoft's statement at a news conference tuesday, but highlighted that U.S. authorities are recently stepping up efforts to combat illegal and anti-competitive mergers.
Founded in 1979 by former employees of Atari Inc., Activision has developed or purchased many of the most popular video games, from pitfall in the 1980s to the Guitar Hero and World of Warcraft series. Bobby Kotic, 59, has been the company's chief executive since 1991.
Microsoft said it expects the deal to close in fiscal year 2023, which begins in July. Kotic will continue to serve as CEO of Activision. After the deal closes, Activision's business unit will report to Phil Spencer, head of Microsoft's Xbox division, who will now serve as CEO of Microsoft Games.
Kotic experienced multiple executive turnovers at Activision last year, following a series of controversies over alleged "toxic" workplace culture. A shareholder lawsuit in August alleges that the company is currently under investigation in California because it failed to disclose the specifics to investors and that there are workplace culture issues that could lead to litigation issues.
In September, Activision and the U.S. Equal Employment Opportunity Commission (U.S. The Equal Employment Opportunity Commission) reached an agreement to settle claims that have been investigated for nearly three years. The agency said Activision failed to take effective measures to respond after it was revealed that employees complained of sexual harassment, discriminated against pregnant employees, and retaliated against publicly expressed employees, including firing them.
Microsoft has also been investigating workplace sexual harassment and sexism within Microsoft, and at its annual shareholder meeting last November, investors asked Microsoft to open an investigation. The company promised to release a report later this year on how it handled sexual harassment allegations, including past allegations involving senior leaders such as co-founder Bill Gates.
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