Microsoft has just sealed the deal of the decade by acquiring Activision Blizzard for a staggering $75 billion, a move that extends the remarkable legacy of Chief Executive Satya Nadella. Over the past ten years, Nadella’s strategic acquisitions have transformed the tech giant, propelling it to the forefront of various industries, from gaming to artificial intelligence.
The acquisition, finalized on a monumental Friday, marks the largest in Microsoft’s nearly 50-year history and involved navigating a 21-month journey through a complex web of global regulations.
With Activision’s lineup of blockbuster franchises such as Call of Duty and Candy Crush now in its arsenal, Microsoft’s video game business will receive a significant boost, surpassing $24 billion in revenue. This strategic move also underscores Microsoft’s shift away from Xbox consoles, focusing more on gaming content that transcends platforms and devices.
Nadella, during his tenure as CEO, has consistently pushed Microsoft into new frontiers, leveraging the company’s financial strength to diversify its portfolio. Those who’ve worked closely with him emphasize his passion for rapid expansion.
Jim DuBois, a former Microsoft chief information officer, underscores Nadella’s approach, stating that he is unhesitant to acquire assets that accelerate Microsoft’s entry into new domains.
Although the investment in gaming is substantial, it remains a relatively small segment within Microsoft’s overall portfolio. Incorporating Activision into the mix would increase gaming’s contribution to Microsoft’s revenue to approximately 10% in the latest fiscal year, up from the reported 7%. This figure would put the video gaming division on par with the Windows business, significantly overshadowing other Microsoft sectors like LinkedIn and advertising, albeit remaining dwarfed by the Office products and cloud services category.
Nonetheless, video gaming isn’t currently the crown jewel of Microsoft’s endeavors. Nadella and other company executives are more vocal about the strides made in artificial intelligence and their hefty $10 billion investment in OpenAI, the brains behind ChatGPT. During a recent earnings call, Nadella mentioned AI and OpenAI a staggering 50 times, compared to only one mention of Activision and nine references to gaming.
Microsoft has wholeheartedly invested in AI, infusing it into nearly all its products. AI now powers Microsoft’s Bing search engine, the Windows operating system, and is being integrated into their flagship products like Outlook, PowerPoint, and Excel.
Since taking the helm in 2014, Nadella has orchestrated significant acquisitions, including LinkedIn for $26 billion, Nuance Communications for $16 billion, ZeniMax Media for $7.5 billion, and even pursuing deals with TikTok, Pinterest, and Discord. These acquisitions have driven a remarkable transformation, nearly tripling Microsoft’s revenue and increasing its stock price eightfold as the Nasdaq Composite Index tripled.
In terms of acquisitions, Microsoft has outpaced other U.S. tech giants, with over 326 deals valued at over $170 billion during Nadella’s tenure, according to Dealogic. Broadcom ranks second with around $150 billion in deals, more than half of which resulted from its 2022 acquisition of VMware.
Microsoft’s acquisition of Activision, adjusted to $69 billion after accounting for the gaming company’s net cash, grants access to a vast library of mobile gaming titles, strengthening Microsoft’s appeal to Game Pass subscribers. This service offers cloud gaming, enabling instant access to games across various devices, ultimately reshaping the future of video gaming.
Cloud gaming, while in its infancy, is expected to dominate the video gaming industry, paralleling the rise of streaming services like Netflix in the world of video. This technology eliminates the need for expensive consoles or computers, providing seamless access to games through smartphones, smart TVs, and other internet-connected devices.
ALSO READ: Chevron Loses Ground as Rival ExxonMobil Makes a $60 Billion Power Move in Oil & Gas
Bringing the Activision acquisition to fruition required nearly two years of diligent effort, extensive negotiations, and adjustments to the deal’s terms to address global regulatory concerns. The U.K.’s Competition and Markets Authority recently approved the acquisition, concluding that it no longer poses a significant threat to competition in cloud gaming. Microsoft, in its bid to secure approval, agreed to relinquish cloud-streaming rights for Activision’s popular franchises in many parts of the world.
Though the deal initially faced opposition from the CMA and the U.S. Federal Trade Commission, Microsoft’s perseverance ultimately prevailed in the U.S. Legal experts suggest that any further challenges by the FTC are likely to be a protracted process, with limited prospects for success.
Microsoft’s unwavering commitment to the deal’s completion underscores its deep pockets and formidable global presence. When the acquisition was announced in January 2022, it was expected to close by July 2023, with a later extension to October 18.
However, this hard-won acquisition of Activision could mark a turning point for Microsoft and other tech giants, as regulators have grown increasingly skeptical of multibillion-dollar deals. They now scrutinize, delay, and sometimes reject such transactions more than ever.
ALSO READ: Banana Fiber Magic: Ugandan Business Transforms Waste into Eco-Friendly Handicrafts
Nadella’s track record with acquisitions has granted him flexibility with investors to make substantial investments. The structure of Microsoft’s deal with OpenAI, which involved a $13 billion investment for a 49% stake, allows the company to access cutting-edge technology without the regulatory burdens associated with full ownership.
As technology evolves and priorities within Microsoft shift, the company continues to adapt, making bold moves while navigating a changing landscape.
