After two years of navigating through numerous challenges, Xbox CEO Phil Spencer now faces his next quest: making Microsoft’s acquisition of Activision Blizzard worth all the hassle. Having closed a $69 billion deal to acquire the game-maker on Friday, Microsoft, the owner of the Xbox gaming system, has a rare opportunity to catch up to rival Sony’s PlayStation. This marks a pivotal moment for Spencer, who joined Microsoft as an intern in 1988 and has been leading Xbox since 2014. However, his job is just beginning as the real work lies in integrating the newly acquired business. Analyst Gil Luria, a technology strategist at D.A. Davidson, emphasizes the significance of this moment, stating that Spencer has been preparing for this day all along.
For Activision Blizzard CEO Bobby Kotick, this acquisition signifies the end of an era. Kotick has been at the helm of the Southern California game-maker since 1991, aiding in its purchase out of bankruptcy. However, his role will now transition into assisting with the handover until the end of the year. This acquisition comes at a time when Activision Blizzard was already facing numerous challenges, including worker protests, lawsuits, and government investigations related to allegations of workplace harassment and unequal pay for women. In fact, it was amidst these controversies that Microsoft expressed its interest in acquiring the company in 2021.
The road to finalizing the deal was far from smooth. After negotiations with Spencer hit a roadblock, major rival Sony raised concerns about losing access to the Call of Duty franchise and brought them to regulators worldwide. The biggest opposition came from antitrust enforcers in the United States and the United Kingdom, who were keen on taking a tougher stance on big tech deals. However, Microsoft had no choice but to proceed with the acquisition to maintain a competitive edge against Sony’s PlayStation platform. Luria comments that, in retrospect, Microsoft should have anticipated the difficulties in closing the deal and may have approached it differently. Nonetheless, Microsoft eventually secured approval by making certain concessions to appease regulatory concerns.
An essential turning point in the acquisition process occurred when a federal judge weighed in on the U.S. Federal Trade Commission’s (FTC) attempt to block the merger. Xbox CEO Phil Spencer, highlighting the importance of the deal, spent several weeks in a San Francisco courtroom conferring with Microsoft’s legal team. Eventually, the judge dismissed the FTC’s request, but the agency is still seeking to unwind the deal. Given Microsoft’s mixed track record with acquisitions, there is no guarantee of success in integrating Activision’s business, says George Jijiashvili, a senior principal analyst at Omdia. Microsoft’s previous acquisition of ZeniMax Media, the parent company of Bethesda Softworks, received varied reactions, making it crucial for Microsoft to prove its ability to manage acquisitions effectively.
Another significant challenge for Microsoft lies in addressing the workforce issues that plagued Activision Blizzard before the acquisition. As of late last year, Activision Blizzard had about 13,000 employees, with the majority located in North America. Microsoft has pledged to remain neutral if workers in the U.S. and Canada decide to organize into a labor union, as part of an agreement with the Communications Workers of America. This commitment aims to address concerns regarding the potential impact of the merger on workers’ rights. President Claude Cummings Jr. of the CWA emphasizes that it is a new day for workers at Activision Blizzard and acknowledges their efforts to form unions despite facing illegal retaliation and obstacles.
Microsoft’s acquisition of Activision Blizzard represents a significant opportunity for the company to enhance its gaming ecosystem and catch up to Sony’s PlayStation platform. While the road to closing the deal was riddled with challenges, Xbox CEO Phil Spencer now faces the task of integrating Activision Blizzard effectively. Microsoft’s track record with acquisitions, as well as addressing the workforce challenges inherited from Activision Blizzard, will shape the ultimate success of this venture. Nonetheless, this acquisition marks a pivotal moment in the company’s history and sets the stage for a new chapter in the gaming industry.
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