Microsoft
MSFT
is reportedly holding talks to purchase Discord for more than $10 billion,
per a Bloomberg report.
There has been no official comment on the development from either of the parties.
Discord is a voice, video and text communication platform, which is highly used by gamers for communication while playing video games online. The company boasts more than 100 million monthly active users. Citing Pitchbook data, Bloomberg noted that the company’s valuation stood at $7 billion in 2020.
Referring to sources familiar with the matter, Bloomberg further added that Discord was holding discussions with various buyers for some time now. Microsoft could be a potential buyer, but nothing is final yet.
Microsoft Corporation Price and Consensus
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Microsoft Corporation Quote
Citing another source, Bloomberg added that Discord could even go public instead of the sale. Earlier, Discord reportedly proposed its sale to both Epic Games Inc and
Amazon
AMZN
.
How Microsoft Could Benefit from Discord Buyout?
The acquisition of Discord will help Microsoft as it pushes its video gaming business toward software and services as noted by a Bloomberg Intelligence Analyst. The analyst further added that the tech giant can further boost the subscriber base for its Game Pass subscription by integrating Discord’s superior offering Nitro with the service.
Microsoft has been revving up its video game business to fortify its position in the lucrative video game space against rivals like
Sony
SNE
and Nintendo.
According to Mordor Intelligence report
, the video gaming market is expected to witness a CAGR of 10.5% between 2021 and 2026.
Last year, there was a massive spurt in global video gaming activity due to the lockdown. Further, growing interest in esports, rapid proliferation of smartphones along with swift 5G deployment and adoption of advanced technologies like augmented/virtual reality (AR/VR) for next generation video games will act as catalysts for the overall gaming market.
Cloud gaming is witnessing considerable momentum as it enables access to video games on any android device anywhere and at any time.
As part of its strategy to reinvigorate its video game business, the company
announced the acquisition
of Bethesda Softworks’ parent company — ZeniMax Media — for an all-cash deal valued at $7.5 billion in September 2020.
Post the acquisition, all ZeniMax’s creative studios like Bethesda Softworks, ZeniMax Online Studios and Bethesda Game Studios, along with all their video game franchises will belong to Microsoft. This brings the number of in-house development studios to 23 from 15 for Microsoft.
Microsoft also launched next generation of gaming consoles namely Xbox Series X and Xbox series S in November 2020. The company
expects
its gaming revenues for fiscal third quarter of 2021 to be up 40% year over year on strong demand for the next-generation consoles. Also, Xbox content and services revenues are anticipated to grow in the mid-20% range.
Microsoft is working on its
Game Pass Ultimate subscription
service to drive console hardware business. The software giant has integrated its cloud gaming with Game Pass Ultimate at no extra cost for subscribers. The company also bundled
Electronic Arts
EA
EA Play service with the Xbox Game Pass Ultimate subscription at no additional cost to lure more subscribers.
At present, Microsoft carries a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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