Tech

Cloud Gaming Could Help Microsoft Win $69 Billion Activision Deal

Published

1 year ago

May 17, 2023

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.

That might be just what Microsoft investors need.

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Tech

How to Preorder the PlayStation 5 Pro in Canada

Published

3 days ago

September 10, 2024

Harry Miller

Sony has made it easy for Canadian consumers to preorder the PlayStation 5 Pro in Canada directly from PlayStation’s official website. Here’s how:

Visit the Official Website: Go to direct.playstation.com and navigate to the PS5 Pro section once preorders go live on September 26, 2024.
Create or Log in to Your PlayStation Account: If you don’t have a PlayStation account, you will need to create one. Existing users can simply log in to proceed.
Place Your Preorder: Once logged in, follow the instructions to preorder your PS5 Pro. Ensure you have a valid payment method ready and double-check your shipping information for accuracy.

Preorder Through Major Canadian Retailers

While preordering directly from PlayStation is a popular option, you can also secure your PS5 Pro through trusted Canadian retailers. These retailers are expected to offer preorders on or after September 26:

Best Buy Canada
Walmart Canada
EB Games (GameStop)
Amazon Canada
The Source

Steps to Preorder via Canadian Retailers:

Visit Retailer Websites: Search for “PlayStation 5 Pro” on the website of your preferred retailer starting on September 26.
Create or Log in to Your Account: If you’re shopping online, having an account with the retailer can speed up the preorder process.
Preorder in Store: For those who prefer in-person shopping, check with local stores regarding availability and preorder policies.

3. Sign Up for Notifications

Many retailers and websites offer the option to sign up for notifications when the preorder goes live. If you’re worried about missing out due to high demand, this can be a useful option.

Visit Retailer Sites: Look for a “Notify Me” or “Email Alerts” option and enter your email to stay informed.
Use PlayStation Alerts: Sign up for notifications directly through Sony to be one of the first to know when preorders are available.

4. Prepare for High Demand

Preordering the PS5 Pro is expected to be competitive, with high demand likely to result in quick sellouts, just as with the initial release of the original PS5. To maximize your chances of securing a preorder:

Act Quickly: Be prepared to place your order as soon as preorders open. Timing is key, as stock can run out within minutes.
Double-Check Payment Information: Ensure your credit card or payment method is ready to go. Any delays during the checkout process could result in losing your spot.
Stay Informed: Monitor PlayStation and retailer websites for updates on restocks or additional preorder windows.

Final Thoughts

The PlayStation 5 Pro is set to take gaming to the next level with its enhanced performance, graphics, and new features. Canadian gamers should be ready to act fast when preorders open on September 26, 2024, to secure their console ahead of the holiday season. Whether you choose to preorder through PlayStation’s official website or your preferred retailer, following the steps outlined above will help ensure a smooth and successful preorder experience.

For more details on the PS5 Pro and to preorder, visit direct.playstation.com or stay tuned to updates from major Canadian retailers.

Tech

Introducing the PlayStation 5 Pro: The Next Evolution in Gaming

Published

3 days ago

September 10, 2024

Harry Miller

Since the PlayStation 5 (PS5) launched four years ago, PlayStation has continuously evolved to meet the demands of its players. Today, we are excited to announce the next step in this journey: the PlayStation 5 Pro. Designed for the most dedicated players and game creators, the PS5 Pro brings groundbreaking advancements in gaming hardware, raising the bar for what’s possible.

Key Features of the PS5 Pro

The PS5 Pro comes equipped with several key performance enhancements, addressing the requests of gamers for smoother, higher-quality graphics at a consistent 60 frames per second (FPS). The console’s standout features include:

Upgraded GPU: The PS5 Pro’s GPU boasts 67% more Compute Units than the current PS5, combined with 28% faster memory. This allows for up to 45% faster rendering speeds, ensuring a smoother gaming experience.
Advanced Ray Tracing: Ray tracing capabilities have been significantly enhanced, with reflections and refractions of light being processed at double or triple the speed of the current PS5, creating more dynamic visuals.
AI-Driven Upscaling: Introducing PlayStation Spectral Super Resolution, an AI-based upscaling technology that adds extraordinary detail to images, resulting in sharper image clarity.
Backward Compatibility & Game Boost: More than 8,500 PS4 games playable on PS5 Pro will benefit from PS5 Pro Game Boost, stabilizing or enhancing performance. PS4 games will also see improved resolution on select titles.
VRR & 8K Support: The PS5 Pro supports Variable Refresh Rate (VRR) and 8K gaming for the ultimate visual experience, while also launching with the latest wireless technology, Wi-Fi 7, in supported regions.

Optimized Games & Patches

Game creators have quickly embraced the new technology that comes with the PS5 Pro. Many games will receive free updates to take full advantage of the console’s new features, labeled as PS5 Pro Enhanced. Some of the highly anticipated titles include:

Alan Wake 2
Assassin’s Creed: Shadows
Demon’s Souls
Dragon’s Dogma 2
Final Fantasy 7 Rebirth
Gran Turismo 7
Marvel’s Spider-Man 2
Ratchet & Clank: Rift Apart
Horizon Forbidden West

These updates will allow players to experience their favorite games at a higher fidelity, taking full advantage of the console’s improved graphics and performance.

Design & Compatibility

Maintaining consistency within the PS5 family, the PS5 Pro retains the same height and width as the original PS5 model. Players will also have the option to add an Ultra HD Blu-ray Disc Drive or swap console covers when available.

Additionally, the PS5 Pro is fully compatible with all existing PS5 accessories, including the PlayStation VR2, DualSense Edge, Pulse Elite, and Access controller. This ensures seamless integration into your current gaming setup.

Pricing & Availability

The PS5 Pro will be available starting November 7, 2024, at a manufacturer’s suggested retail price (MSRP) of:

$699.99 USD
$949.99 CAD
£699.99 GBP
€799.99 EUR
¥119,980 JPY

Each PS5 Pro comes with a 2TB SSD, a DualSense wireless controller, and a copy of Astro’s Playroom pre-installed. Pre-orders begin on September 26, 2024, and the console will be available at participating retailers and directly from PlayStation via direct.playstation.com.

The launch of the PS5 Pro marks a new chapter in PlayStation’s commitment to delivering cutting-edge gaming experiences. Whether players choose the standard PS5 or the PS5 Pro, PlayStation aims to provide the best possible gaming experience for everyone.

Preorder your PS5 Pro and step into the next generation of gaming this holiday season.

Tech

Google Unveils AI-Powered Pixel 9 Lineup Ahead of Apple’s iPhone 16 Release

Published

1 month ago

August 13, 2024

Harry Miller

Google has launched its next generation of Pixel phones, setting the stage for a head-to-head competition with Apple as both tech giants aim to integrate more advanced artificial intelligence (AI) features into their flagship devices. The unveiling took place near Google’s Mountain View headquarters, marking an early debut for the Pixel 9 lineup, which is designed to showcase the latest advancements in AI technology.

The Pixel 9 series, although a minor player in global smartphone sales, is a crucial platform for Google to demonstrate the cutting-edge capabilities of its Android operating system. With AI at the core of its strategy, Google is positioning the Pixel 9 phones as vessels for the transformative potential of AI, a trend that is expected to revolutionize the way people interact with technology.

Rick Osterloh, Google’s senior vice president overseeing the Pixel phones, emphasized the company’s commitment to AI, stating, “We are obsessed with the idea that AI can make life easier and more productive for people.” This echoes the narrative Apple is likely to push when it unveils its iPhone 16, which is also expected to feature advanced AI capabilities.

The Pixel 9 lineup will be the first to fully integrate Google’s Gemini AI technology, designed to enhance user experience through more natural, conversational interactions. The Gemini assistant, which features 10 different human-like voices, can perform a wide array of tasks, particularly if users allow access to their emails and documents.

In an on-stage demonstration, the Gemini assistant showcased its ability to generate creative ideas and even analyze images, although it did experience some hiccups when asked to identify a concert poster for singer Sabrina Carpenter.

To support these AI-driven features, Google has equipped the Pixel 9 with a special chip that enables many AI processes to be handled directly on the device. This not only improves performance but also enhances user privacy and security by reducing the need to send data to remote servers.

Google’s aggressive push into AI with the Pixel 9 comes as Apple prepares to unveil its iPhone 16, which is expected to feature its own AI advancements. However, Google’s decision to offer a one-year free subscription to its advanced Gemini Assistant, valued at $240, may pressure Apple to reconsider any plans to charge for its AI services.

The standard Pixel 9 will be priced at $800, a $100 increase from last year, while the Pixel 9 Pro will range between $1,000 and $1,100, depending on the model. Google also announced the next iteration of its foldable Pixel phone, priced at $1,800.

In addition to the new Pixel phones, Google also revealed updates to its Pixel Watch and wireless earbuds, directly challenging Apple’s dominance in the wearable tech market. These products, like the Pixel 9, are designed to integrate seamlessly with Google’s AI-driven ecosystem.

Google’s event took place against the backdrop of a significant legal challenge, with a judge recently ruling that its search engine constitutes an illegal monopoly. This ruling could lead to further court proceedings that may force Google to make significant changes to its business practices, potentially impacting its Android software or other key components of its $2 trillion empire.

Despite these legal hurdles, Google is pressing forward with its vision of an AI-powered future, using its latest devices to showcase what it believes will be the next big leap in technology. As the battle for AI supremacy heats up, consumers can expect both Google and Apple to push the boundaries of what their devices can do, making the choice between them more compelling than ever.