Microsoft buys Activision Blizzard to become third-largest gaming firm

Highlights

• Microsoft said it would acquire Activision Blizzard for nearly US$69 billion in an all-cash deal.
  
  
• Since July, Activision has fired over three dozen employees and disciplined around 40 more staff members over sexual harassment and misconduct cases.
  
  
• Activision Blizzard will report its fourth-quarter FY2021 results on February 3.

Shares of Activision Blizzard, Inc. (NASDAQ: ATVI) jumped over 37% on Tuesday after Microsoft Corporation announced acquiring the video gaming company for US$68.7 billion in an all-cash deal.

The Santa Monica, California-based company is known for publishing video games like “Call of Duty”, “World of Warcraft”, “Candy Crush”, etc.

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The deal, bigger than Microsoft’s acquisition of LinkedIn for US$26 billion in 2016, marks the software company’s biggest push into the gaming industry. The purchase, when completed, will make Microsoft the world’s third-largest gaming company by revenue after Tencent and Sony.

Activision Blizzard has been making headlines of late over sexual misconduct involving its executives. On Monday, the company said it has fired over three dozen employees and disciplined some 40 more since July over misconduct and sexual harassment.

Under the deal, Activision CEO Bobby Kotick will retain his post and report to Microsoft's Xbox brand head Phil Spencer. Kotick had faced calls for resignation over misconduct.

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Activision Blizzard, Inc. (NASDAQ: ATVI) stock performance, financials
 

The shares of Activision Blizzard traded at US$90.00 at 8:47 am ET on Jan 18, up 37.64% from its previous close. The stock price rose 5.81% over the past 30 days.

Activision has a market cap of US$50.93 billion, a P/E ratio of 19.35, and a forward one-year P/E ratio of 18.74. Its EPS is 3.38.

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The ATVI stock saw the highest price of US$104.53 and the lowest price of US$56.40 in the last 52-week. Its trading volume on January 14 was 13,495,720.

The firm is expected to release its fourth-quarter fiscal 2021 results on February 3 after the closing bell.

The company's total net revenue was US$2.07 billion in Q3, FY21, compared to US$1.95 billion in the same quarter of the previous year. Its net income came in at US$639 million, or US$0.82 per diluted share, compared to US$604 million, or US$0.78 per diluted share in Q3, FY20.

Activision expects its revenue to be around US$2.02 billion in Q4, FY21.

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Bottomline

Microsoft said it would become the world’s third-largest gaming company by revenue after the deal concludes. Microsoft (MSFT) stock fell 1.14% to US$306.90 at 9:14 am ET on Jan 18. The acquisition reflects Microsoft’s long-term vision for Meta Platforms - an all-inclusive metaverse currently dominated by the gaming industry.