ETFs in Focus as Microsoft Closes Activision Deal
On Oct 13, Microsoft’s MSFT $69 billion takeover of Activision Blizzard ATVI was granted the green light by Britain’s competition watchdog – Competition and Markets Authority (“CMA”).The regulatory authority granted clearance for the purchase excluding cloud gaming rights from the agreement.
According to CNBC, CMA remained one of the most vocal oppositions to the takeover citing competition concerns in the emerging cloud gaming market. In May, the EU was the first major regulator to clear the deal after Microsoft's concessions. In July, a judge's decision overruled the FTC's bid to block it, prompting CMA to consider Microsoft’s takeover proposals given some restricting to the transaction.
The new agreement will prevent Microsoft from monopolizing the cloud gaming sector as it gains momentum, ensuring competitive pricing and services for cloud gaming customers in the UK, as said by CMA and quoted on the CNBC article.
How Will Microsoft Benefit From the Deal?
The takeover can now allow Microsoft to get a good foothold in the mobile gaming market, an area where it has limited presence, enabling it to gain control over a range of iconic gaming franchises, including Call of Duty, the mobile hit Candy Crush, and the Diablo franchises. According to Microsoft executive, as quote on Fortune, this takeover is a passage for the tech giant to penetrate the $93 billion mobile gaming market.
According to Reuters,considering the uncertainties surrounding the growing cloud gaming trend, it's wise for Microsoft to expand in gaming areas less susceptible to cloud disruption and elevate game quality. Activision fulfills both these objectives.
Cloud Gaming: The Next Big Thing?
With subscription-based services that let users stream games similarly to how they stream movies or TV episodes on websites like Netflix, cloud gaming is seen as the nascent frontier of the sector. Valued at $3.37 billion in 2022, the cloud gaming market is estimated to reach a valuation of $84.97 billion by 2023, at a CAGR of 46.9%, according to Fortune Business Insights.
Cloud gaming turns the tables on the likes ofXbox and PlayStation, disrupting their traditional dominance over the gaming market. According to Reuters,just like how consumers can stream Netflix on various devices, cloud gaming relies on robust remote servers to handle game processing and deliver it to players via the Internet.
To take an example, gamers could easily obtain an affordable dongle and connect it to any television in their living room, bedroom, or even while on the go, enabling them to play games wherever they choose, possibly even removing the need for expensive consoles.
ETFs in Focus
Below, we highlight ETFs with an exposure to Microsoft.
Technology Select Sector SPDR Fund (XLK) – has an exposure of 23%
Fidelity MSCI Information Technology Index ETF (FTEC) – has an exposure of 20.41%
iShares Global Tech ETF (IXN) – has an exposure of 19.73%
iShares U.S. Technology ETF (IYW) – has an exposure of 16.67%
Vanguard Information Technology ETF (VGT) – has an exposure of 16.54%
Investors can also watch video game ETFs like VanEck Video Gaming and eSports ETF ESPO, Global X Video Games & Esports ETF HERO and VanEck Gaming ETF BJK as cloud gaming gains more traction.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
Global X Video Games & Esports ETF (HERO): ETF Research Reports
Technology Select Sector SPDR ETF (XLK): ETF Research Reports
VanEck Gaming ETF (BJK): ETF Research Reports
Fidelity MSCI Information Technology Index ETF (FTEC): ETF Research Reports
iShares U.S. Technology ETF (IYW): ETF Research Reports
Vanguard Information Technology ETF (VGT): ETF Research Reports
iShares Global Tech ETF (IXN): ETF Research Reports
VanEck Video Gaming and eSports ETF (ESPO): ETF Research Reports
