Microsoft's Activision bid will make it a gaming giant — but it comes with one giant catch

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Microsoft (MSFT) rocked the gaming industry on Tuesday with the news that it’s purchasing Activision Blizzard (ATVI) for $68.7 billion, or $95 a share, a 45% premium over its Friday closing price of $65.39. The move instantly turns Microsoft into the world’s third largest gaming company by revenue, behind just Tencent and Sony, and gives it a massive foothold in the largest and fastest growing gaming market: mobile gaming.

Microsoft CEO Satya Nadella says it will also power the company’s plans for taking on the metaverse. “Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” Nadella said in a statement.

But the transaction, the largest in Microsoft’s history, isn’t without its risks. By purchasing Activision Blizzard, Microsoft becomes tied to a company facing allegations of widespread sexual harassment that has reportedly resulted in the ouster of three dozen employees since July. And how Microsoft handles that could have a direct impact on the success of the deal.

The entrance to the Activision Blizzard Inc. campus is shown in Irvine, California, U.S., August 6, 2019.  Microsoft is buying the gaming giant for nearly $69 billiioin.  REUTERS/Mike Blake
The entrance to the Activision Blizzard Inc. campus is shown in Irvine, California, U.S., August 6, 2019. Microsoft is buying the gaming giant for nearly $69 billiioin. REUTERS/Mike Blake · Mike Blake / reuters

The hits keep coming for Activision Blizzard

While Microsoft is clearly focused on how it will benefit from gaining Activision Blizzard’s franchises including “Call of Duty,” “Overwatch,” and “Candy Crush,” the game maker's ongoing harassment and discrimination scandal also looms large.

On Monday The Wall Street Journal reported that Activision Blizzard has pushed out dozens of employees after investigating complaints of harassment. According to The Journal, Activision Blizzard CEO Bobby Kotick purposely held back a company-issued report of the actions against the employees out of fears that it would make the problem at the gaming giant look worse.

Kotick isn’t going anywhere for the time being, though. Under the terms of Microsoft’s agreement, he will stay on as Activision Blizzard’s CEO, reporting to Microsoft’s games CEO Phil Spencer.

During a press briefing, Nadella tiptoed around addressing the scandal directly.

“As CEO of Microsoft, the culture of our organization is my number 1 priority,” he said. “This means we must continuously improve the lived experience of our employees and create an environment that allows us to constantly drive every day improvement in our culture. This is hard work. It requires consistency, commitment, and leadership that not only talks the talk but walks the walk.”

CEO of Activision Blizzard Bobby Kotick arrives for the Allen & Company Sun Valley Conference on July 06, 2021 in Sun Valley, Idaho. He will remain as CEO after the Microsoft deal. (Photo by Kevin Dietsch/Getty Images)
CEO of Activision Blizzard Bobby Kotick arrives for the Allen & Company Sun Valley Conference on July 06, 2021 in Sun Valley, Idaho. He will remain as CEO after the Microsoft deal. (Photo by Kevin Dietsch/Getty Images) · Kevin Dietsch via Getty Images

The Activision Blizzard scandal game to light when the California Department of Fair Employment and Housing filed suit in July claiming Activision Blizzard allowed a culture of sexual harassment to fester unchecked for years.