The Activision Blizzard Deal Is a Welcome Change for Both Companies

Microsoft (NASDAQ:MSFT) is buying Activision Blizzard (NASDAQ:ATVI) for $68.7 billion. It’s a play for both the gaming market and the emerging metaverse space. The bid sent ATVI stock up more than 25%. Activision Blizzard stock opened January 19 at $82.64, a market cap of $64.1 billion.

The logo for Activision Blizzard is shown on a phone screen in front of the Microsoft logo.

Source: Sergei Elagin /

The difference between the bid price and trading price represents the risk of getting the deal past regulators. Microsoft hopes to close it next year.

Activision Blizzard is the largest pure game producer in the U.S. It’s also the No. 6 most valuable gaming property after Microsoft itself. Before the deal, ATVI stock was trading at about $64. The all-cash deal works out to about $95 per share, a 48% premium.

What Microsoft Gets

Microsoft is less interested in the developers than its games. These include World of Warcraft and the Call of Duty and Candy Crush franchises. Activision Blizzard bought King Digital, maker of Candy Crush, for $5.9 billion in 2016.

In the near term, the games bolster the Microsoft Xbox game console and Xbox Live, its cloud gaming network. Activision Blizzard could also help Microsoft in the “metaverse,” a mixture of virtual reality, augmented reality, social networking and gamification that caused Facebook to change its name to Meta Platforms (NASDAQ:FB) last year. Meta has since set a $29-34 billion capital spending plan for 2022, mostly aimed at metaverse software.

The deal represents a lifeline to ATVI CEO Bobby Kotick, who is expected to retire after the transition. Kotick has spent his entire career in games and software.

Activision Blizzard was sued by the state of California over a “frat boy” office culture that saw women subjected to sexual harassment, unequal pay and retaliation. After first calling the suit “irresponsible,” Kotick wrote a letter calling that response “tone deaf.” The day before the deal was announced, the company said it had let go 36 employees and disciplined 40 others over the issue since July.

But even after that announcement Kotick was accused of hiding the extent of the problem. The California suit said that misogyny has been rampant in the gaming industry for decades. Kotick eventually took a 50% pay cut over the issue. He will now reap a $375 million windfall.

What This Means for MSFT Stock and ATVI Stock

This is Microsoft’s biggest acquisition ever, topping the 2016 deal to buy LinkedIn for $26.2 billion. But it carries enormous risks.

Xbox head Phil Spencer will have to rebuild Activision Blizzard’s corporate culture. He wrote in November he was “disturbed and troubled” by the allegations against ATVI and was “evaluating all aspects” of Microsoft’s relationship with it.

Microsoft must also get the deal past antitrust regulators, not just in the U.S. but in Europe. It will argue that it faces even-bigger competitors in gaming, like Tencent Holdings (OTCMKTS:TCEHY) of China, Sea (NYSE:SE) of Singapore and Apple (NASDAQ:AAPL), whose app store reportedly makes more from games than any gaming company.

The key to making this work is Spencer, 54, whose new title is CEO of Microsoft Gaming. Spencer is a Microsoft lifer who joined the company in 1988 as an intern.

Spencer is now the second most-important figure at Microsoft, behind only CEO Satya Nadella, who is also 54. Spencer must get the deal past regulators, integrate ATVI into Microsoft, sooth competitors about Microsoft’s ambitions and rebuild ATVI’s corporate culture. He also must develop and articulate a metaverse strategy and positioning for Microsoft.

The future of my own Microsoft investment is now all in the game. For now, I’m letting it ride.

On the date of publication, Dana Blankenhorn held long positions in AAPL and MSFT. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at, tweet him at @danablankenhorn, or subscribe to his Substack

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