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January 18, 2022 | Microsoft News Center announces “Acquisition of Activision Blizzard to bring the joy and community of gaming to everyone, across every device.”
Big news for the videogame industry, Microsoft surprised the world with the announcement that it will acquire Activision Blizzard for a whopping $68.7 billion. The news came exactly two months after Microsoft Gaming CEO Phil Spencer described the sexual harassment and discrimination scandal at Activision Blizzard as “horrific,” and said Microsoft was “evaluating all aspects” of its relationship with the company.
Yes, the deal dwarfed all others before it, at least in the game business. The scale of the buyout is staggering. It will give Microsoft control of some of the biggest game series in the world, including Call of Duty, Warcraft, and Overwatch, and a massive backlog of older games. In conjunction with Microsoft’s purchase of Bethesda Softworks just over a year ago—a blockbuster deal in its own right, even though it was only for a small fraction of the Activision Blizzard price tag—it will make Microsoft the third-largest game company in the world by revenue.
But, what deserve our attention and care study, is the reason Activision Blizzard lost more than $12 Billion even after Microsoft generously paid the share price at the close of Friday session trade plus 45% top up. what happened with the share price weeks before the acquisition? And how come sexual harassment, misconduct of human resources and discrimination lead the company to lose a fortune in a matter of weeks?!
Activision Blizzard is an American video game holding company based in Santa Monica, California. The company owns and operates additional subsidiary studios, as part of Activision Publishing, including Treyarch, Infinity Ward, High Moon Studios, and Toys for Bob. Among major intellectual properties produced by Activision Blizzard are Call of Duty, Crash Bandicoot, Guitar Hero, Skylanders, World of Warcraft, StarCraft, Diablo, Hearthstone, Heroes of the Storm, Overwatch, and Candy Crush Saga.
As of March 2018, it was the largest game company in the Americas and Europe in terms of revenue and market capitalization. In September 2021 its revenues reached $9 Billion, same year where its valuation reached $80 Billion with a share price of $103. One of its major investors is Saudi Public Investment Fund which owns around 13.3% of the shares.
With three billion people actively playing games today, and fueled by a new generation steeped in the joys of interactive entertainment, gaming is now the largest and fastest-growing form of entertainment. Also with the COVID-19 outbreak, the lockdown and billions of people stayed at home made the industry nourish.
The company has been involved in multiple notable controversies, including allegations of infringed patents and unpaid royalties, In late July 2021, it was sued by the California Department of Fair Employment and Housing on allegations of sexual harassment and employee discrimination. The suit triggered an investigation by the U.S. Securities and Exchange Commission, multiple workplace walkouts, the resignation or dismissal of several employees, the loss of multiple company event sponsors, and hundreds of workplace harassment allegations.
Activision CEO Bobby Kotick Knew for Years About Sexual-Misconduct Allegations at Videogame Giant, Top executive didn’t inform board of some reports, including alleged rapes; company faces multiple regulatory investigations.
Bobby told senior managers in November 2021 that he would consider leaving if he couldn’t quickly fix the culture problems. Activision Blizzard Inc. has fired or pushed out more than three dozen employees and disciplined about 40 others since July as part of efforts to address allegations of sexual harassment and other misconduct at the videogame giant, according to people familiar with the situation.
A summary of those personnel actions was scheduled to be released by Activision before the winter holidays, but Chief Executive “Bobby Kotick” held it back, telling some people it could make the company’s workplace problems seem bigger than is already known, the people familiar with the situation said.
Activision’s moves follow sustained pressure from shareholders, staff and business partners for more accountability over its handling of misconduct issues. The recently completed summary also says Activision had collected about 700 reports
of employee concern over misconduct and other issues—in some cases separate reports about the same incidents—since July, when a California state agency filed a lawsuit against the company over harassment claims.
An Activision spokeswoman, Helaine Klasky, confirmed that 37 people have “exited” and 44 have been disciplined as part of the company’s investigation. She disputed the 700 figure. In a statement, she said employee comments included statements on social media, and the issues raised ranged from what she described as benign workplace concerns to “a small number” of potentially serious assertions, which the company has investigated. She said “the assertion regarding Mr. Kotick is untrue,” and “our focus is making sure we have accurate data and analysis to share.”
Santa Monica, Calif.-based Activision, has been under intensified scrutiny since a Wall Street Journal investigative article in November showing that Mr. Kotick, who has served as CEO for more than three decades, didn’t inform the board of sexual misconduct allegations that he was aware of, including rape, against managers across the company.
Citing interviews and internal documents, also detailed misconduct allegations against Mr. Kotick, including when an assistant complained in 2006 that he had threatened in a voice mail to have her killed.
Activision has said the Wall Street Journal’s reporting gave a misleading view of the company and its CEO. Mr. Kotick has said he was transparent with his board, which issued a statement supporting him. An Activision spokeswoman has said that he wouldn’t have been informed of every report of misconduct and that Mr. Kotick regrets the alleged incident with his assistant.
Activision Blizzard employees staged a protest in July 2021 to call for changes in conditions for women and other marginalized groups. Activision also is facing regulatory probes into its culture and its handling of harassment allegations from the Securities and Exchange Commission and the California Department of Fair Employment and Housing, which filed the July 2021 lawsuit against it in Los Angeles Superior Court. The company has disputed the California agency’s allegations and said it is cooperating with the SEC.
In September 2021, Activision said it had agreed to a settlement with the Equal Employment Opportunity Commission over sexual-harassment and other misconduct claims at the company. That agreement awaits approval by a judge.
In October 2021, Activision announced a series of changes, including a zero-tolerance harassment policy and an end to mandatory arbitration for harassment and discrimination claims.
Brianna Wu, a game developer who received threats during the scandal, talks about the future of the industry and how actions by HR departments or legislative bodies could encourage more gender diversity,
In December 2021, Chief Operating Officer Daniel Alegre said in a staff letter that Activision was committed to increasing the share of women and nonbinary employees by 50% within the next five years to more than one third of the total, and to being more transparent about workplace issues. “One of the key areas of feedback has been the need to share more information openly as a company,” the letter said.
As described in the unreleased summary, company officials led by Frances Townsend, Activision’s chief compliance officer, have also worked to remove employees they have determined to be guilty of bad behavior, according to the people familiar with the situation.
Nearly a fifth of Activision’s roughly 10,000 employees signed a petition calling for Mr. Kotick to resign. The company also has faced questions from major business partners. Toy company Lego said it paused the planned release of a product line based on Activision’s Overwatch franchise and is reviewing its partnership with Activision due to “concerns about the progress being made to address continuing allegations regarding workplace culture.” Ms. Klasky said Activision values Lego’s feedback and is talking with the company about changes it is making.
Activision’s share price is down nearly 30% since the first regulatory investigation was made public in late July 2021, a period in which the Nasdaq Composite Index rose by a few percent. Investors have called and written to the company and its directors in recent weeks, expressing concern about Activision and its board’s handling of misconduct allegations, and about the independence of the board in general, according to people familiar with the communications and to correspondence viewed by the Journal.
Ms. Klasky said Activision is “routinely in discussion with our shareholders regarding inquiries they make.”
Fidelity International, a U.K.-based investor, sent a letter to Activision Chairman Brian Kelly calling for an independent review by an outside law firm and saying the board should consider placing Mr. Kotick on administrative leave while that happens.
Activision’s board has stood by Mr. Kotick, with directors telling some investors that he is the right person to lead the company and pointing to the initiatives taken to change its culture, according to the people familiar with the investor communications.
Microsoft Corp. (Nasdaq: MSFT) announced to acquire Activision Blizzard Inc. (Nasdaq: ATVI), a leader in game development and interactive entertainment content publisher. This acquisition will accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse.
Microsoft will acquire Activision Blizzard for $95.00 per share, in an all-cash transaction valued at $68.7 billion, inclusive of Activision Blizzard’s net cash. When the transaction closes, Microsoft will become the world’s third-largest gaming company by revenue, behind Tencent and Sony.
Microsoft has made a good deal, Activision Blizzard and its investors lost fortune of more than $12 Billion for not putting enough emphasis on Human Resources, Policies and procedures activated on the ground, harassment hotline and audits that would have prevented all this from happening. The investment in the Human Resource Department is not a luxury, it means money.
Pinnacle has a set of consultation programs, trainings, services to help your organization plot the right human resources strategy, build watertight policies and procedures that control the workplace, the relationship and the culture of our clients.
Pinnacle® is a multi-country consultancy firm. Our consultants are spread around the world. We have built our organization on modern business model with agility, diversity, and resilience to the business dynamics. We have chosen our technology platform to support our modern mindset thus we work from anywhere …. As work is not a place anymore. We implement Lean Six Sigma in everything we do whether internally or externally at our client sites.
Article is written by:
Mohamed Mounir,
Managing Director
Pinnacle Ltd.
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