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Tuesday, January 18, 2022

Live Reactions to Microsoft-Activision Blizzard Acquisition Webcast for Investors and Media

By LUDWIG VON KOOPA - This certainly wasn't what I was expecting to talk about today!

Hopefully you aren't hearing it here first, but Microsoft just announced their intentions to acquire Activision Blizzard, to close by the end of this year/sometime next year. The deal hasn't been fully approved, but it seems they're confident in it. Head of Xbox, Phil Spencer, blogged about it here, and there is a Microsoft press release here. Near the end of the Microsoft press release was a link to a webcast hosted by Microsoft and Activision leadership intended for investors and the media, so I decided to join and live-react to it. I don't have a video on-demand of it because they apparently will make their recording (accessible only via... phone? Or Microsoft Teams?) disappear around January 28. Still, my reaction log below should do a good job both summarising what they discussed, as well as letting you know my own thoughts as they formed.

[9:00 AM] Ludwig Von Koopa: I'm listening to the conference call between Microsoft and Activision.
[9:00 AM] Ludwig Von Koopa: Satya Nadella (CEO), Bobby Kotick (CEO, Activision), Amy Hood (CFO Microsoft), and Phil Spencer (Xbox Gaming Head).
[9:01 AM] Ludwig Von Koopa: Largest acquisition in Microsoft's history.
[9:02 AM] Ludwig Von Koopa: This makes the Zenimax acquisition look like a test run.
[9:03 AM] Ludwig Von Koopa: Satya is excited about "three billion people playing games" with 4.5 billion expected by 2030.
[9:03 AM] Ludwig Von Koopa: But it's still too complicated to play games, apparently.
[9:03 AM] Ludwig Von Koopa: Too many distribution constraints.
[9:04 AM] Ludwig Von Koopa: And Satya is saying "metaverse" multiple times.
[9:04 AM] Ludwig Von Koopa: There won't be one metaverse but many metaverses, and Microsoft wants to support them with strong content franchises accessible on every device.
[9:05 AM] Ludwig Von Koopa: They're fairly excited about Activision Blizzard's mobile portfolio as well. (Like Candy Crush via King.)
[9:06 AM] Ludwig Von Koopa: And Activision Blizzard games will come to Game Pass, including from their previous catalog and new games.
[9:06 AM] Ludwig Von Koopa: Xbox Game Pass at 25 million subscribers, and I'm sure they'll get that even higher.
[9:08 AM] Ludwig Von Koopa: Satya is excited about mobile Overwatch or Diablo. (Gamers are less excited about that, to my understanding.)
[9:08 AM] Ludwig Von Koopa: Satya says Microsoft's culture is his number one priority. I'm sure this part of the presentation wouldn't be present if Bobby Kotick and his management weren't creeps.
[9:09 AM] Ludwig Von Koopa: Microsoft is supportive of Activision Blizzard fixing themselves, and cites a "journey of inclusion."
[9:10 AM] Ludwig Von Koopa: https://www.koopatv.org/2021/11/big-three-respond-to-bobby-kotick-activision.html#microsoft
So when Phil Spencer was re-evaluating Microsoft's business relationship with Activision Blizzard over these abuse allegations, they decided to buy Activision Blizzard?
[9:10 AM] Ludwig Von Koopa: Instead of cutting them out?
[9:10 AM] Ludwig Von Koopa: Bobby Kotick is talking now.
[9:11 AM] Ludwig Von Koopa: Bobby Kotick believes siding with Microsoft and their resources will be quite helpful.
[9:11 AM] Ludwig Von Koopa: And he's also saying "metaverse" repeatedly.
[9:12 AM] Ludwig Von Koopa: Getting a "rich metaverse" will require more resources than what Microsoft and Activision can do alone.
[9:12 AM] Ludwig Von Koopa: So maybe that means Sony will acquire Epic Games, I dunno.
[9:13 AM] Ludwig Von Koopa: Since if Microsoft and Activision can't do it alone, those companies can't either!
[9:13 AM] Ludwig Von Koopa: Activision Blizzard was apparently looking to be acquired, but "all roads lead to Microsoft." (Guess they didn't want to be bought by Sony. Maybe too Japanese.)
[9:14 AM] Ludwig Von Koopa: 45% premium to Activision Blizzard's share price, which was declining a bit due to all of Bobby Kotick's bad culture.
[9:14 AM] Ludwig Von Koopa: So Microsoft's premium overpriced purchase price pretty much undid all of that decline.
[9:15 AM] Ludwig Von Koopa: Because that's the share price they were at a year ago.
[9:15 AM] Ludwig Von Koopa: Phil Spencer now on the call, to "extend the joy" of gaming to "everyone on the planet."
[9:15 AM] Ludwig Von Koopa: Number three gaming community in revenue behind Tencent and Sony.
[9:16 AM] Ludwig Von Koopa: StarCraft, Overwatch, Diablo, Call of Duty, World of Warcraft, Candy Crush, Tony Hawk's Pro Skater, and Crash Bandicoot are among Activision Blizzard's franchises. Phil Spencer says this is a long-term strategy.
[9:19 AM] Ludwig Von Koopa: Microsoft's metaverse vision are "global" "intersecting" "communities" with "strong franchises."
Again, Phil Spencer is excited about Activision Blizzard's mobile presence (thanks to King), because Microsoft has historically not had a strong presence in mobile. (RIP Windows Phone)
[9:19 AM] Ludwig Von Koopa: Microsoft claims they will respect the individual Activision Blizzard studios, which isn't something Activision Blizzard themselves does.

Microsoft Xbox Activision Blizzard acquisition franchises portfolio content
For some reason, my eyes are drawn to how Tony Hawk's Pro Skater 1 + 2 is a franchise.
(Because there were more games in the series after that!)


[9:20 AM] Ludwig Von Koopa: Amy Hood, Microsoft's Chief Financial Officer, explaining how this helps Microsoft's shareholder value.
[9:20 AM] Ludwig Von Koopa: Content, Community, and Cloud are the three pillars they keep referencing. Increased engagement and monetisation and Game Pass subscribers.
[9:21 AM] Ludwig Von Koopa: Transaction details... $95 per share, all-cash transaction, $68.7 billion enterprise value. Expected to close in fiscal year 2023. Transaction approved by both companies. Activision Blizzard business will report to Phil Spencer. Hasn't been approved by Activision Blizzard's shareholders or by regulators yet.
[9:23 AM] Ludwig Von Koopa: Microsoft's goal of bringing joy to everyone on the planet is exclusionary of everyone outside of the planet, like myself.
[9:23 AM] Ludwig Von Koopa: ...Oh, it just suddenly ended, saying to watch their Q2 earnings call next week.
[9:23 AM] Ludwig Von Koopa: (They're in fiscal year 2022 right now, so fiscal year 2023 will begin at the end of 2022.)
[9:26 AM] Ludwig Von Koopa: Well, again, the biggest point of commentary I have is how "evaluating all aspects of our relationship with Activision Blizzard and making ongoing proactive adjustments," ended up resulting in "let's go acquire them!"
[9:26 AM] Ludwig Von Koopa: I guess it's quite possible that Microsoft is better positioned to "fix" Activision Blizzard than Activision Blizzard would do themselves.
[9:27 AM] Ludwig Von Koopa: ...But I'm sure this is far less about that and more about the metaverse and Xbox Game Pass stuff.
[9:28 AM] Ludwig Von Koopa: At some point Microsoft needs to re-coup the many acquisition costs they've been doing with these Xbox Game Pass new subscriptions, and I feel like this one just added a lot of years to that break-even!



Feel free to speculate on what the next huge acquisition will be! KoopaTV didn't even talk about how Take-Two announced it's buying out Zynga for 11 billion dollars just last week! Consolidation is clearly the trend. Are you excited? Or terrified? How long do you think Bobby Kotick will remain at Microsoft once the acquisition is complete?


Activision bought out King in 2015–2016.
And then Microsoft bought out ZeniMax for many billions less from 2020 to 2021.
Two weeks later, Sony announced they're acquiring Bungie.

2 comments :

  1. "Microsoft claims they will respect the individual Activision Blizzard studios, which isn't something Activision Blizzard themselves does."

    My reaction in a nutshell to this was, "I doubt they can do any worse than Blizzard themselves."

    Hopefully, my quote of you is an indication. I'm also pretty sure Blizzard's stock price went way UP with the news, which I'm pretty sure is not usual.

    ReplyDelete
    Replies
    1. ATVI stock almost entirely undid the past year of declines caused by all of the toxic workplace allegations due to this announcement.
      The market really wants this deal to go through!

      Delete

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