Microsoft Getting Serious About WOW

Microsoft is paying nearly $70 billion for Activision Blizzard, the maker of "Candy Crush" and "Call of Duty," as it seeks an edge in the fiercely competitive businesses of mobile gaming and virtual-reality technology. The all-cash $68.7 billion deal will turn Microsoft, maker of the Xbox gaming system, into one of the world's largest video game companies and help it compete with tech rivals such as Meta, formerly Facebook, in creating immersive virtual worlds for both work and play. If the deal survives scrutiny from U.S. and European regulators in the coming months, it also could be one of the biggest tech acquisitions in history. Dell bought data-storage company EMC in 2016 for around $60 billion.

Activision has been buffeted for months by allegations of misconduct and unequal pay, and that was addressed Tuesday by Microsoft CEO Satya Nadella in a conference call with investors. "The culture of our organization is my number one priority," Nadella said, adding that "it's critical for Activision Blizzard to drive forward on its" commitments to improve its workplace culture. Activision disclosed last year it was being investigated by the Securities and Exchange Commission over complaints of workplace discrimination. The Wall Street Journal had reported Monday that the SEC was investigating how the company had treated complaints of sexual misconduct and workplace discrimination, and had subpoenaed senior executives including CEO Bobby Kotick, a well-known tech billionaire who is Facebook COO Sheryl Sandberg's ex-boyfriend. An SEC spokesman declined to comment.

Activision Blizzard also said Tuesday that it has cooperated with an Equal Employment Opportunity Commission investigation into employment practices and that it is working with multiple regulators "on addressing and resolving workplace complaints it has received" and that it is committed to making the company "one of the best, most inclusive places to work." It has hired a new "Chief People Officer" from Disney. That was after California sued the Santa Monica-based company in July, citing a "frat boy" culture that had become "a breeding ground for harassment and discrimination against women." The lawsuit alleges that female employees face constant sexual harassment, that few women are named to leadership roles and when they are, they earn less salary, incentive pay, and total compensation than male peers.

Activision Blizzard CEO Bobby Kotick sent a letter to employees after the lawsuit was filed, stating that the company was "taking swift action to be the compassionate, caring company you came to work for and to ensure a safe environment." "There is no place anywhere at our Company for discrimination, harassment, or unequal treatment of any kind," he wrote.

On Tuesday it was announced that J. Allen Brack was leaving the company in a letter from Activision Blizzard President and COO Daniel Alegre to employees. Brack joined Blizzard in January 2006 and held multiple leadership roles before being named president in October 2018, according to the company's website. The complaint alleges that as far back as 2019, Brack had been told that employees were leaving the Santa Monica, California, company because of rampant sexual harassment and sexism. It also alleged employees had approached the company's human resources department with complaints of unfair pay and assignments. The complaint says that despite the numerous complaints to human resources personnel and executives including Brack, no effective remedial measures were taken. The lawsuit also claims that Brack only gave verbal counseling, deemed a "slap on the wrist," to Alex Afrasiabi, former senior creative director for "World of Warcraft." Afrasiabi is accused in the complaint of engaging in blatant sexual harassment and the state alleged that the company refused to deal with it because of his position.

Jen Oneal and Mike Ybarra were named co-leaders of Blizzard, sharing responsibility for development and operational accountability for the company, it said Tuesday. Activision CEO Bobby Kotick will retain his role, and he and his team will maintain their focus on driving efforts to further strengthen the company's culture and accelerate business growth. Wall Street saw the acquisition as a big win for Activision Blizzard Inc. and shares soared 27% in early trading Tuesday, making up for losses over the past six months since California's discrimination lawsuit was filed. Shares of Microsoft slipped less than 1%. Last year, Microsoft spent $7.5 billion to acquire ZeniMax Media, the parent company of video game publisher Bethesda Softworks, which is behind popular video games "The Elder Scrolls," "Doom," and "Fallout."

Microsoft, based in Redmond, Washington, said both acquisitions will help beef up its Xbox Game Pass game subscription service. Started in 1979 by former Atari Inc. employees, Activision has been behind games such as "Guitar Hero" and the "World of Warcraft" franchise. Kotick has been CEO since 1991. Microsoft said it expects the deal to close in the upcoming 2023 fiscal year, which starts in July. The Activision business unit would then report to Phil Spencer, who has led Microsoft's Xbox division and will now serve as CEO of Microsoft Gaming.