In this article

Microsoft announced Tuesday it will buy video game giant Activision Blizzard in a $68.7 billion all-cash deal.

Shares of Activision soared about 37% in pre-market trading before being halted after the Wall Street Journal first reported the deal.

Microsoft shares fell more than 2% following the announcement

Activision, which is known for popular games such as Call of Duty and Tony Hawk’s Pro Skater, has been mired in controversy for the last several months following reports of sexual misconduct and harassment among the company’s executives. On Monday, Activision said it fired dozens of executives after an investigation.

Under the deal, Activision CEO Bobby Kotick, who has faced calls to resign over the cultural problems within his company, will remain CEO and report to Microsoft’s Xbox boss Phil Spencer.

Microsoft has gotten more aggressive with gaming over the past several years. It bought Minecraft maker Mojang for $2.5 billion in 2014. And last year, Microsoft completed a $7.5 billion acquisition of game maker Bethesda.

The deal also plays into a long-term vision for Microsoft as it competes with Meta (formerly Facebook) to build technologies to create a virtual world called the metaverse. In fact, Microsoft CEO Satya Nadella was the first Big Tech CEO to publicly acknowledge the value of the metaverse, months before Meta CEO Mark Zuckerberg. Today, virtual worlds are dominated by gaming, but the hope is they expand to cater to other demographics and replace a lot of traditional social networking activity online.

Microsoft Corp. announced plans to acquire Activision Blizzard Inc.
Courtesy: Microsoft Inc.

That said, both companies focused on the present in announcing the deal, with a highlight on Activision’s strength in mobile gaming. For example, Activision owns Candy Crush, one of the most popular and lucrative mobile games around. They also highlighted the opportunity to cross-promote popular gaming franchises from both companies, like Microsoft’s Halo and Activision’s World of Warcraft.

“The last two years in particular have shown how critical games are to helping people maintain a sense of community and belonging, even when they are apart,” Nadella said on a conference call Tuesday morning following the announcement of the deal. He added that 3 billion people around the world play video games, a hint at the total market he sees Microsoft moving into.

This story is developing. Check back for updates.