Microsoft cut a $69 billion deal in January 2022 to acquire Activision Blizzard, maker of the video games Call of Duty and Candy Crush.
At the time, I saw four reasons the deal could be good for investors: a large market opportunity in gaming and the metaverse, potential to increase the combined companies’ market share, a positive net present value, and strong integration of the two companies.
Since then, two significant developments have emerged:
Regulators have given mixed verdicts. While the EU approved the deal, American and British regulators have raised objections “on the grounds that it would undercut competition,” according to the New York Times.
The metaverse seems to have faded into the background and a new industry — cloud gaming — could help determine whether U.S. and U.K. will approve the acquisition.
Will Microsoft’s Activision Blizzard deal go through? If so, is that good for Microsoft stock? If it isn’t approved, will Microsoft stock fall?
I think the odds now are greater that deal will be approved and that is good for the stock.
If the deal is not approved, Microsoft stock — which has eked out a 5% gain since the January 2022 announcement — remains a good investment thanks to revenue potential from ChatGPT.
In fact, given the $40 billion in new revenue that its AI skills could bring to Microsoft’s top line, investors might be better off if the $69 billion earmarked for Activision Blizzard was spent on expanding its AI business instead.
Microsoft’s $69 Billion Activision Blizzard Deal
Seventeen months ago, Microsoft made a nearly $69 billion cash offer to acquire Activision Blizzard.
With 400 million gaming users, leaders at Microsoft’s Redmond, Washington headquarters were grabbing an opportunity to buy the company on the cheap. After all, its stock had fallen 27% in the wake of a July 2021 lawsuit alleging “sexual harassment and discrimination that senior executives ignored,” according to the Times.
Regulatory approval of the deal was not assured due to antitrust grounds. Specifically, there was concern that Microsoft would use its control of popular new Activision game releases to encourage consumers to buy its Xbox console.
More specifically, Cowen analysts anticipated a mere 33% chance that the deal would be approved. That’s because regulators might be concerned that Microsoft would favor the release of Activision games on Xbox over rivals such as Sony’s PlayStation which could elicit a lawsuit to block the deal, MarketWatch reported.
Here are four reasons I thought the deal could be good for Microsoft investors:
It aimed at three potentially large markets. These included the $41 billion video game publishing industry, the $81 billion gaming console market; and the metaverse — which was a dream in 2022 and was estimated to grow at a 39% average annual rate to $21.7 trillion by 2030.
Microsoft’s share of the first two markets would increase. Specifically, adding Activision’s 10% share of video gaming to Microsoft’s 23.9% slice of the pie would result in a considerable boost in its post-deal market position. Microsoft would likely give preference to its Xbox and gamers were more confident that Redmond would make better new games.
Positive net present value. The future cash flows from the deal discounted to the present would exceed the $69 billion purchase price by $4.4 billion, according to my calculations back then. The most important assumption was that the cash flows from the deal would continue to grow at Activision’s 25% average annual rate.
Strong integration of the two companies. Given Microsoft CEO Satya Nadella’s success with acquisition integration in previous deals — such as LinkedIn and GitHub — a similar success was more likely with Activision.
The Decline Of The Metaverse And The Rise Of Cloud Gaming
In early 2022, I was still getting used to Facebook’s name change to Meta Networks — a decision announced in late October 2021. Since then, the reason for the name change — a huge investment in the amorphous metaverse — does not seem to make much sense now.
Indeed, last July, Meta’s financial results and stock price had plunged — costing the company $230 billion in stock market capitalization after an awful February 2022 financial report.
What’s more, Mark Zuckerberg announced plans to reduce by 30% to 40% the number of people Meta would hire in 2022. Since then, Meta eliminated 11,000 jobs in November 2022 and announced another 21,000 cuts in March 2023, noted the Washington Post.
The new thing is cloud gaming — which uses 5G networks to give gamers a wireless, low latency gaming experience on TVs, phones and tablets without requiring customized hardware such as the Xbox or PlayStation.
The market for cloud gaming totaled $3.2 billion in 2022 and is anticipated to grow at a nearly 43.6% average annual rate to $40.8 billion by 2029, according to Fortune Business Insights.
Regulatory Approval Status And Next Steps
Cloud gaming helped Microsoft win the 27-nation EU’s approval for its Activision deal on May 15. EU officials said they would allow the deal because Microsoft “made concessions to ensure that rival companies of new online gaming services would have continued access to titles developed by Activision,” the Times reported.
Specifically, Microsoft agreed to make Activision titles available on cloud gaming platforms for a decade after the deal closes “on cloud gaming services being developed by other companies, such as Nvidia,” noted the Times. Meanwhile. U.S. and U.K. regulators oppose the deal because they fear it would squelch competition — in part by slowing the growth of the cloud gaming industry.
Sixteen governments must approve the deal. In December 2022, the Federal Trade Commission sued to block the deal. On April 26, Britain’s Competition and Markets Authority (CMA) rejected Microsoft’s bid, noted the Times.
The FTC opposed the deal because it “would harm consumers and lure gamers away from rivals.” The CMA “stands buy its decision to oppose the deal.”
Can Microsoft’s strategy for gaining EU approval of the deal help it win over these two regulators?
Microsoft President Brad Smith said its concessions would benefit consumers. “The European Commission has required Microsoft to license popular Activision Blizzard games automatically to competing cloud gaming services. This will empower millions of consumers worldwide to play these games on any device they choose.”
The EC concluded this concession would remove Microsoft’s incentive to deny PlayStation — which has a large share of the European gaming console market — access to Activision titles because doing so would lower Microsoft’s profit.
CMA still opposes the deal. “They would replace a free, open and competitive market with one subject to ongoing regulation of the games Microsoft sells, the platforms to which it sells them, and the conditions of sale. This is one of the reasons the CMA’s independent panel group rejected Microsoft’s proposals and prevented this deal,” CEO Sarah Cardell said in a May 15 statement.
Significant uncertainty remains about whether Microsoft can reverse the opposition from the FTC and CMA.
Is Microsoft Stock A Buy?
Microsoft stock reflects the low probability of regulatory approval for the Activision Blizzard deal. I wonder whether investors have modeled the benefit of ChatGPT.
Last month I estimated that ChatGPT could add $40 billion to Microsoft’s revenues. To put that into perspective, in the year ending March 2023, Microsoft generated about $208 billion in revenue. So, ChatGPT revenue could add 20% to Microsoft’s top line.
By contrast, Activision Blizzard’s revenue for the period was $8.1 billion, some 2% below the year before level — representing about 4% of Microsoft’s revenue.
Were the Activision Blizzard deal to fall apart, it would free up $69 billion in cash that Microsoft could invest in ChatGPT-related new business lines.
The federal government is ordering the dissolution of TikTok’s Canadian business after a national security review of the Chinese company behind the social media platform, but stopped short of ordering people to stay off the app.
Industry Minister François-Philippe Champagne announced the government’s “wind up” demand Wednesday, saying it is meant to address “risks” related to ByteDance Ltd.’s establishment of TikTok Technology Canada Inc.
“The decision was based on the information and evidence collected over the course of the review and on the advice of Canada’s security and intelligence community and other government partners,” he said in a statement.
The announcement added that the government is not blocking Canadians’ access to the TikTok application or their ability to create content.
However, it urged people to “adopt good cybersecurity practices and assess the possible risks of using social media platforms and applications, including how their information is likely to be protected, managed, used and shared by foreign actors, as well as to be aware of which country’s laws apply.”
Champagne’s office did not immediately respond to a request for comment seeking details about what evidence led to the government’s dissolution demand, how long ByteDance has to comply and why the app is not being banned.
A TikTok spokesperson said in a statement that the shutdown of its Canadian offices will mean the loss of hundreds of well-paying local jobs.
“We will challenge this order in court,” the spokesperson said.
“The TikTok platform will remain available for creators to find an audience, explore new interests and for businesses to thrive.”
The federal Liberals ordered a national security review of TikTok in September 2023, but it was not public knowledge until The Canadian Press reported in March that it was investigating the company.
At the time, it said the review was based on the expansion of a business, which it said constituted the establishment of a new Canadian entity. It declined to provide any further details about what expansion it was reviewing.
A government database showed a notification of new business from TikTok in June 2023. It said Network Sense Ventures Ltd. in Toronto and Vancouver would engage in “marketing, advertising, and content/creator development activities in relation to the use of the TikTok app in Canada.”
Even before the review, ByteDance and TikTok were lightning rod for privacy and safety concerns because Chinese national security laws compel organizations in the country to assist with intelligence gathering.
Such concerns led the U.S. House of Representatives to pass a bill in March designed to ban TikTok unless its China-based owner sells its stake in the business.
Champagne’s office has maintained Canada’s review was not related to the U.S. bill, which has yet to pass.
Canada’s review was carried out through the Investment Canada Act, which allows the government to investigate any foreign investment with potential to might harm national security.
While cabinet can make investors sell parts of the business or shares, Champagne has said the act doesn’t allow him to disclose details of the review.
Wednesday’s dissolution order was made in accordance with the act.
The federal government banned TikTok from its mobile devices in February 2023 following the launch of an investigation into the company by federal and provincial privacy commissioners.
— With files from Anja Karadeglija in Ottawa
This report by The Canadian Press was first published Nov. 6, 2024.
LONDON (AP) — Most people have accumulated a pile of data — selfies, emails, videos and more — on their social media and digital accounts over their lifetimes. What happens to it when we die?
It’s wise to draft a will spelling out who inherits your physical assets after you’re gone, but don’t forget to take care of your digital estate too. Friends and family might treasure files and posts you’ve left behind, but they could get lost in digital purgatory after you pass away unless you take some simple steps.
Here’s how you can prepare your digital life for your survivors:
Apple
The iPhone maker lets you nominate a “ legacy contact ” who can access your Apple account’s data after you die. The company says it’s a secure way to give trusted people access to photos, files and messages. To set it up you’ll need an Apple device with a fairly recent operating system — iPhones and iPads need iOS or iPadOS 15.2 and MacBooks needs macOS Monterey 12.1.
For iPhones, go to settings, tap Sign-in & Security and then Legacy Contact. You can name one or more people, and they don’t need an Apple ID or device.
You’ll have to share an access key with your contact. It can be a digital version sent electronically, or you can print a copy or save it as a screenshot or PDF.
Take note that there are some types of files you won’t be able to pass on — including digital rights-protected music, movies and passwords stored in Apple’s password manager. Legacy contacts can only access a deceased user’s account for three years before Apple deletes the account.
Google
Google takes a different approach with its Inactive Account Manager, which allows you to share your data with someone if it notices that you’ve stopped using your account.
When setting it up, you need to decide how long Google should wait — from three to 18 months — before considering your account inactive. Once that time is up, Google can notify up to 10 people.
You can write a message informing them you’ve stopped using the account, and, optionally, include a link to download your data. You can choose what types of data they can access — including emails, photos, calendar entries and YouTube videos.
There’s also an option to automatically delete your account after three months of inactivity, so your contacts will have to download any data before that deadline.
Facebook and Instagram
Some social media platforms can preserve accounts for people who have died so that friends and family can honor their memories.
When users of Facebook or Instagram die, parent company Meta says it can memorialize the account if it gets a “valid request” from a friend or family member. Requests can be submitted through an online form.
The social media company strongly recommends Facebook users add a legacy contact to look after their memorial accounts. Legacy contacts can do things like respond to new friend requests and update pinned posts, but they can’t read private messages or remove or alter previous posts. You can only choose one person, who also has to have a Facebook account.
You can also ask Facebook or Instagram to delete a deceased user’s account if you’re a close family member or an executor. You’ll need to send in documents like a death certificate.
TikTok
The video-sharing platform says that if a user has died, people can submit a request to memorialize the account through the settings menu. Go to the Report a Problem section, then Account and profile, then Manage account, where you can report a deceased user.
Once an account has been memorialized, it will be labeled “Remembering.” No one will be able to log into the account, which prevents anyone from editing the profile or using the account to post new content or send messages.
X
It’s not possible to nominate a legacy contact on Elon Musk’s social media site. But family members or an authorized person can submit a request to deactivate a deceased user’s account.
Passwords
Besides the major online services, you’ll probably have dozens if not hundreds of other digital accounts that your survivors might need to access. You could just write all your login credentials down in a notebook and put it somewhere safe. But making a physical copy presents its own vulnerabilities. What if you lose track of it? What if someone finds it?
Instead, consider a password manager that has an emergency access feature. Password managers are digital vaults that you can use to store all your credentials. Some, like Keeper,Bitwarden and NordPass, allow users to nominate one or more trusted contacts who can access their keys in case of an emergency such as a death.
But there are a few catches: Those contacts also need to use the same password manager and you might have to pay for the service.
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LONDON (AP) — Britain’s competition watchdog said Thursday it’s opening a formal investigation into Google’s partnership with artificial intelligence startup Anthropic.
The Competition and Markets Authority said it has “sufficient information” to launch an initial probe after it sought input earlier this year on whether the deal would stifle competition.
The CMA has until Dec. 19 to decide whether to approve the deal or escalate its investigation.
“Google is committed to building the most open and innovative AI ecosystem in the world,” the company said. “Anthropic is free to use multiple cloud providers and does, and we don’t demand exclusive tech rights.”
San Francisco-based Anthropic was founded in 2021 by siblings Dario and Daniela Amodei, who previously worked at ChatGPT maker OpenAI. The company has focused on increasing the safety and reliability of AI models. Google reportedly agreed last year to make a multibillion-dollar investment in Anthropic, which has a popular chatbot named Claude.
Anthropic said it’s cooperating with the regulator and will provide “the complete picture about Google’s investment and our commercial collaboration.”
“We are an independent company and none of our strategic partnerships or investor relationships diminish the independence of our corporate governance or our freedom to partner with others,” it said in a statement.
The U.K. regulator has been scrutinizing a raft of AI deals as investment money floods into the industry to capitalize on the artificial intelligence boom. Last month it cleared Anthropic’s $4 billion deal with Amazon and it has also signed off on Microsoft’s deals with two other AI startups, Inflection and Mistral.
