Sector: Technology Dave Novosel September 29 , 20 20
[email protected] Winning In Games ♦ Microsoft (MSFT), although apparently a much better match than Oracle, lost out on the bidding for TikTok. But it may have saved itself some headaches, given the political interference in that situation. After losing that opportunity, the company turned immediately and announced the acquisition of ZeniMax Media, the parent company of Bethesda Softworks. Bethesda develops and publishes video games, including The Elder Scrolls, Doom, and Fallout. The deal expands Microsoft’s game studios from 15 to 23, strengthening its position in the rapidly expanding gaming market. The timing is good as Microsoft is about to launch its eagerly awaited Xbox Series X and Series S in time for the holiday season. In addition, Microsoft bolsters its line-up to attract more users to its Xbox Game Pass. Microsoft is paying $7.5 billion in cash to acquire ZeniMax Media. ZeniMax is privately held, but speculation is that annual revenue was less than $1 billion, implying that EBITDA was less than $300 million. Therefore the deal could be viewed as quite expensive. But Microsoft has such tremendous financial flexibility that it really won’t have much of an impact on the credit profile. The company has close to $14 billion in cash and another $123 billion in short-term investments. In addition, the company generated more than $30 billion of free cash flow in the fiscal year that just ended June 30 th . ♦ Microsoft posted revenue of $143 billion last year, so the acquisition’s financial impact on operations is minimal.