NTDOY - Microsoft set to defend Activision deal in US court amid competition worries

2023-05-12 10:36:22 ET

Microsoft ( NASDAQ: MSFT ) is slated to go before a federal court in San Francisco on Friday to make its case for acquiring Activision Blizzard ( NASDAQ: ATVI ) amid competition worries around the globe, including in the U.S.

At the hearing, U.S. District Judge Jacqueline Corley will determine if she should issue a preliminary injunction to stop the planned $69B acquisition, Reuters reported .

Microsoft ( MSFT ) shares fell 0.7% in early trading on Friday while Activision ( ATVI ) tacked on about 0.5% .

In a May 5 court filing, Microsoft ( MSFT ) lawyers said the plaintiffs, in this case, gamers, are asking to make an "unprecedented" decision and have not demonstrated evidence based on alleged harms to consumers.

Judge Corley previously threw out an earlier version of the complaint, calling it "insufficient," thought she allowed the plaintiffs to refile, the news outlet added.

Redmond, Washington-based Microsoft ( MSFT ) is also dealing with a potential domestic block of the acquisition by the U.S.'s Federal Trade Commission, as it continues its investigation.

The deal has come under some scrutiny abroad, notably in the U.K.

Last month, the U.K.'s antitrust regulator, the Competition and Markets Authority, blocked the deal because of cloud gaming concerns.

In a statement, the CMA said Microsoft ( MSFT ) already has "strong advantages" in cloud gaming, as it owns Windows, it has the Azure cloud platform and Xcloud, along with its Xbox gaming base, bringing its market share of cloud gaming to be between 60% and 70%.

Wall Street analysts were surprised by the block, given the CMA previously narrowed its concern of the acquisition of the Call of Duty publisher to focus on cloud gaming and not console gaming.

Both Activision ( ATVI ) and Microsoft ( MSFT ) have said the U.K. regulator's ruling is flawed and they intend to appeal .

Earlier this week, the CMA blocked Microsoft ( MSFT ) and Activision ( ATVI ) from taking stakes in one another without obtaining its consent.

Japanese entertainment giant Sony ( NYSE: SONY ), which competes with Microsoft ( MSFT ) in gaming, has repeatedly come out against the deal. Microsoft has not signed a cloud gaming deal with Sony, but has signed deals with Nintendo ( OTCPK:NTDOY ), Nvidia ( NVDA ) and others.

The European Commission has yet to rule on the merger, though it is reportedly likely to approve the $69B videogame deal next week, perhaps as soon as Monday.

More on Microsoft, Activision and the future of gaming

• Microsoft signs 10-year cloud deal with Nware after UK blocks Activision deal
• With Microsoft-Activision deal on life support, sniping ramps up ahead of appeal
• Activision rebounds after UK related sell-off, analysts digest strong Q1 results

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