I didnt say he was right.
Ill defer to the army of business titans working at MS.
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Why is it that people think Microsoft needs to make back the money instantly? This is one of their plays into mobile and the further diversity of their portfolio. It also seems to ignore that they already made that money back.
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I would ask the question a different way. Why do people think there is any money to be āmade backā.
They exchanged one asset, cash, for another asset which they value equally to that cash.
In their eyes it is a like for like exchange.
If I trade 10 marbles for 5 baseball cards I donāt need to āmake backā any marbles. I exchanged them for something I valued equally.
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was going to post this when i read it just now then i checked the replies and you literally put into words what iwas thinking.
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If anything the price MS managed to buy ABK is a steal and you will find very few people disputing that.
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Theyāre investing in an asset (the ABK companies) that have the ability to generate cash flows and a return on their investment. If you go look at the cash flow statement of ABK they donāt have 69 billion in assets. . So saying that they value it equally (actually they clearly value it as worth more than 69 billion), while true is missing that they value it there because of its ability to generate future earnings. When you invest, you typically do so with an expectation of how long it will be before you are earn back your cash outflow. Itās not different here. Microsoft knows how much Activision currently brings in in revenue and net income, and they anticipate the value that they can derive from owning them as being higher than the cash investment that theyāre expending to the owners of ABK stock. This particular investment is a much more complicated one than most, and involves Microsoft planning to expand the Xbox platform to further compete with Apple and Google in mobile, but they still will expect that it will bring in revenues from investing in their output.
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Way to get needlessly pedantic about something that was clearly intended to be rudimentary 10,000ft fly over of why āmaking the money backā isnāt the correct way to view the situation.
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Apologies if I do come across as lecturing or being pedantic, that isnāt the goal - itās just that itās frustrating to see people keep saying that they donāt care about it when they clearly do. Iām also probably a bit frustrated when I wrote that because Iāve been made fun of a few times now for trying to explain, so I was attempting to do so in different words this time.
The FTC trial made very clear the constraints that Xbox is under to deliver on revenue & profit goals from Microsoft, and the acquisition of ABK is intended to help them get closer to those goals, not to allow them to just buy an asset that is going to sit there & not bring in revenue. Itās not specifically about āmaking it backā exactly, thereās much more to it than that - but they DO care about bringing in larger revenue over time or they wouldnāt have bought them.
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Microsoft doesnāt need to āmake backā what they spent to acquire ABK. The cash reserves they used for the purchase are literally there to make purchases like this and to be used for emergency operations. The only thing MS is concerned with is making a profit going forward. Last I checked, ABK is plenty profitable on itās own. I think MS will be fine. 
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This time next week the deal could be cleared.
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Its the bargaining stage. Microsoft must make their money back āsoonā so will make all the games multiplat. Its delusion.
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ABK has around $580 Million NET INCOME per quarter. That is $2 to $2.3 Billion of profits each year. 
Yes. Plenty profitable indeed!
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Letās also not forget that ABK has 13 billion in cash on hand.
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The other thing to keep in mind is that Microsoft literally had billions of dollars that were going to be slashed by inflation. They took the best opportunity available to them and it still makes sense today, even if it takes decades to ābreak evenā. The ancillary value impacting the Xbox brand, if they manage ABK correctly, is tough to measure but has to be astronomical.
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I think were heās coming from is the general feeling about the gaming industry as a whole where revenue is going up but at a slower pace then costs are going up thus lower profits. I still disagree with him though as I feel that Microsoft are looking at ABK in a more holistic way, a gaming company with a very strong mobile presence that will help with the push for their own mobile store and huge IP across all platforms that will accelerate growth in cloud/console/pc/subscription numbers. Plus looking at ABKās results, despite a down last financial year theyāve managed a huge first six months of their latest results with a new COD on the horizon
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One last try & then Iāll give up again. What I find a little frustrating but at the same time amusing - is that most of the posts explaining why itās not about making back the purchase price make some VERY good points about cash flows (and why you would invest instead of having huge amounts of liquid capital) that underline the idea that it is important to Microsoft to drive increased revenues with this deal. My point isnāt that they need to specifically make back the money, or that Xbox NEEDS the money because theyād canāt live without it - itās that capitalism is about always growing, always doing more and that Microsoft is just like other big company in that theyāre always trying to grow & expand.
Microsoft has a stated desire (outlined by Satya Nadella internally in June of 2022 and released during the FTC trial) to double its annual revenue by 2030, they even have a cute name for it: ā20/20ā - saying that they want to increase their revenue growth by 20% year over year each year between now & 2030, AND that they want to expand their operating income (profit after expenses) by 20% from 2022 on. For a bit more info on this - Microsoft CEO Nadella said revenue would reach $500 billion by 2030 (cnbc.com)
Can we honestly say that - with the entire company trying to make sure that they can grow revenue & operating income significantly - that somehow itās not important to Nadella & Amy Hood for Xbox to also do this? Iām just saying that they DO care about the amount of revenue that the investment will bring in within the next few years (aka by 2030), but that itās not just looking at current revenue from ATVI & being happy with it - they want to have it make significantly more, and they would have looked at the payback period in planning such a large purchase. This acquisition is part of (not the whole strategy) how Xbox is planning to make sure that they can grow the gaming divisionās revenue & operating income and hit those same targets that the rest of the company is being told to hit.
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The point that an acquisition like this has to drive growth in revenue is completely true.
The issue is the āhow will they make their 70 billion back when Activision only make x profit per year āā¦is a separate and stupid one. They have the book value of ABK that means they arenāt making it back through profit and indeed nobody measures acquisition value like that.
Clearly if they buy them and donāt see growth thatās a problem but itās an entirely different point to throw ladybird accounting takes we see on Twitter etcā¦
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Literally no one is saying they donāt care about driving revenue with this acquisition. That is why posters are calling your explanations pedantic.
Its pretty simple
MS has tons of cash on hand gaining interest over time. MS has bet that ABK will provide a higher return then that money just sitting in the bank. Thats all ABK needs to do for MS to consider it a success.
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Off topic.