Microsoft doesn't need Activision Blizzard
The Xbox division is still growing organically, albeit slowly. And the rest of Mister Softee's cloud business is humming along nicely.
It might be game over for Microsoft’s plans to acquire Call of Duty maker Activision Blizzard after UK regulators formally blocked the proposed $69 billion takeover. But, to name drop my favorite Activision Atari 2600 game of my 1980s youth, this should not be a “Piftall” for Microsoft or its investors.
Microsoft’s stock surged 6% Wednesday morning, hitting a new 52-week high in the process. That’s because the software giant reported strong earnings and revenue, fueled by healthy growth in its cloud businesses. The company’s Xbox unit also posted steady, if not spectacular, sales growth of 3% in the quarter. In other words, Microsoft is doing just fine without Activision and will likely continue to do so.
Sure, adding Activision would bolster Microsoft in its battle with Sony and Nintendo for gaming supremacy. But Microsoft is not a pure play video game company. There are plenty of other parts of its business beyond the cloud that are still thriving. Sales for Microsoft’s Office suite of software for businesses were up 13% in the quarter. Microsoft’s LinkedIn and Bing search units also posted healthy revenue growth.
Wall Street is understandably nervous about the fate of Activision though. Shares tumbled 9% Wednesday morning. But given the consolidation in gaming, Activision could still be a juicy M&A target for someone else at some point. Take-Two’s purchase of Zynga last year has helped bolster its mobile business. Activision might want to do more deals of its own or look to another big tech firm (Google owner Alphabet? Nvidia?) to buy it. Or perhaps it could team up with Electronic Arts, the current odd man out in the gaming merger merry-go-round. (I wrote about EA for my former employer CNN Business last year.)
The stakes are clearly higher for Activision. Microsoft will be okay even if it has to admit defeat and try and find something else to buy with its mountain of cash…which now stands at $104.4 billion.