Please ensure Javascript is enabled for purposes of website accessibility

Why Microsoft Should Buy Valve Software

By Ashraf Eassa - Updated Apr 13, 2019 at 10:32AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Such a move could strengthen the company's position in PC gaming.

If you're a PC gamer, the odds are good that you're using Microsoft (MSFT 1.31%) Windows as your operating system of choice. PC game makers primarily target Windows, with alternative platforms like macOS and Linux being afterthoughts at best.

With that being said, if you're a PC gamer, it's also a good bet that you use Valve Software's Steam platform to purchase and play games. Valve makes its money from Steam by taking a percentage of the revenue generated from each game sale. While this has led some major game publishers to try to build their own game distribution platforms or to strike distribution deals with competing digital platforms that take less of a cut, Steam is still immensely popular and is likely to dominate PC game distribution for the foreseeable future.

A man standing on stage at an Xbox press event.

Image source: Microsoft.

That's exactly why I think Microsoft should buy Valve Software.

Accelerating Microsoft's PC gaming ambitions

Microsoft has increased its focus on PC gaming over the years. In fact, the software giant recently announced that it's bringing many of its Halo games -- titles that have largely been exclusive to the company's successful Xbox platform -- to its Windows platform. On top of that, Microsoft is taking yet another PC gamer-friendly step by making the titles available through both its own Microsoft Store and Valve's Steam.

However, Microsoft's PC gaming ambitions could be absolutely supercharged if it were to buy Steam. Not only would the company get its hands on the digital distribution platform of choice among PC gamers, as well as the ability to effectively monetize that customer base, but it would also get a number of incredible game franchises.

Valve is an extremely successful company (which leads me to believe that such an acquisition would be far from cheap), but under Microsoft -- which has virtually limitless financial resources and brand strength -- the company's assets could be taken to a whole new level.

Indeed, Valve's own Dota 2 and Counter Strike: Global Offensive games are two of the three most played games on Steam. Having those franchises under Microsoft's belt could be a huge boost to its PC gaming cred. On top of that, Valve owns the Half Life and Portal franchises -- arguably two of the most beloved PC gaming franchises of all time. Unfortunately, under Valve these franchises have lain dormant for years, but with Microsoft's resources, they could be revitalized.

In fact, if Microsoft were to buy Valve Software and publicly commit to future Half Life and Portal titles (gamers have been waiting for a sequel to Half Life 2: Episode 2, a game that ended in a cliffhanger, for more than a decade), that could lead to a large influx of goodwill from the PC gaming community.

Check out the latest earnings call transcript for Microsoft.

Investor takeaway

Ultimately, Microsoft is smart in doubling down on PC gaming in general. It's a big and growing market that largely depends on the Windows operating system. If Microsoft were to buy Valve Software, it would not only become the leading distributor of PC games virtually overnight, but it would gain ownership of some of the world's most popular PC games and franchises upon which it could significantly build.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Microsoft Corporation Stock Quote
Microsoft Corporation
$265.96 (1.31%) $3.44

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.