Daily Brief: Microsoft Buys A Games Developer Now So It Can Sell Its Metaverse Later

Daily Brief: Microsoft Buys A Games Developer Now So It Can Sell Its Metaverse Later

about 2 years ago3 mins

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Microsoft announced on Tuesday that it’ll be buying gaming giant World of Warcraft-creator Activision Blizzard, so expect to see changes to in-game hints any day now.

What does this mean?

Like a squeaky-voiced teen with time to kill, Microsoft’s been getting seriously into the gaming thing recently. And it just unlocked its biggest achievement yet: the tech giant is set to buy Activision Blizzard for $69 billion in cash – around 45% more than the gaming company was worth before the announcement. The deal comes hot on the heels of Microsoft’s $7.5 billion acquisition of games maker Bethesda last year, and marks the company’s biggest purchase ever. Microsoft’s hoping it’ll do more than just help it compete with the likes of Sony too: it could enable the company to develop a metaverse that spans everything from gaming to office work.

Microsoft deals

Why should I care?

For markets: Investors are divided.

Activision’s stock jumped 31% after the news, which goes some way to making up for its near-30% collapse since allegations of misconduct rocked the company. That’s Microsoft’s problem now, which might be why investors sent its stock down 2%. Or maybe it’s not the ethical compromises that are going to keep them up at night, but the eye-watering wad of cash the company forked out – money that could’ve otherwise been used to reward shareholders.

Activision stock
Source: Google Finance

Zooming out: Goldman’s mixed bag.

The deal was one of many that Goldman Sachs has worked on recently, which might be why the bank reported on Tuesday that revenue from its investment banking segment came in 45% higher last quarter than the same time the year before. But the company wasn’t short of shortfalls: its trading revenue slumped in line with lower market volatility, and its costs surged 23%. That led Goldman’s profit to fall by a worse-than-expected 13%, and investors weren’t happy: they initially sent its stock down 9%.

Goldman stock
Source: The Wall Street Journal, FactSet

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Car Sales In Europe Fell For The Sixth-Straight Month

EU car sales image

Data out on Tuesday showed that European car sales fell for the sixth-straight month in December, and you can’t help but feel the region’s industry has run out of gas.

What does this mean?

Europe’s carmakers still don’t have enough chips to keep up production, and their sales are suffering as a result. Just look at Germany’s stalwarts: Volkswagen, BMW, and Mercedes-owner Daimler sold 30%, 22%, and 15% fewer cars last month than the same time the year before, causing the country’s overall sales to drop 27%. And since Germany is Europe’s biggest car market, the region saw its sales fall by 22%. That’s left carmakers with one option: shift production to higher-end, more profitable vehicles to try to offset some of the damage.

EU car sales

Why should I care?

For markets: Get used to it.

Trouble is, consulting firm EY thinks this year will be as difficult for carmakers as the last, and it might well be right: China’s zero-tolerance Covid policy has already led to factory shutdowns across the country, which produces around a third of all cars globally. In fact, two of the world’s top-selling carmakers – Toyota and Volkswagen – have been forced to halt a few of their production lines just in the last week or so. And that’s before you get to the minor problem of convincing inflation-hit drivers to open their wallets…

The bigger picture: Once bitten, twice shy.

The absence of new cars might be why the average price of used ones hit $28,000 in the US last month. That’s fueling a much bigger problem: the country’s consumer prices rose 0.5% in December versus the month before, and second-hand cars are estimated to be responsible for at least a fifth of that. America isn’t able to unring that bell, but it won’t let it happen again: the government’s planning to invest billions into chip production, in hopes there’ll always be plenty of new cars going spare.

Used car prices
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