When you think about electronic gaming, do you think about the $175 billion industry? Microsoft has and it announced its intention to buy Activision Blizzard for $70 billion. If you have not heard of the company, you might know some of its games – Call of Duty and Candy Crush.
In an article by Karen Weise, Kellen Browning, Michael J de La Merced and Andrew Ross Sorkin of the New York Times News Service, Microsoft is paying $95 a share roughly 45% premium before the announcement.
Phil Spence, the chief executive officer of Microsoft’s gaming business, believes the metaverse is a huge potential, but gaming will be at the forefront of making that mainstream.
Microsoft owns the Xbox system, but is not in mobile gaming and Activision Blizzard will give the company a strong foothold in the mobile gaming world. Microsoft would become the 3rd largest gaming company by revenue behind Tencent Holdings and Sony.
In addition, Microsoft has 25 million subscribers for its games, Activision has 390 million monthly subscribers. One would expect most will continue to subscribe.
Microsoft has about $130 billion in cash reserve to expand the consumer business.
The reason investors buy Microsoft is the company has largely focused on corporate users for software such as Office and Azure which is the cloud competing division. It competes with Amazon and Google in cloud based solutions.
Linking to dividend paying stocks, one buys a company such as Microsoft for its Office 365 and Azure cloud computing, the gaming is something the company does to stay current with the trends in the industry. As long as resources continue to flow to Office and Azure, the gaming business is a good on add to the company. The issue in the gaming business is everyone is looking for the next blockbuster game to generate excess cash.
There are more questions than answers, till the next time – to raising questions.