What Microsoft's Big Deal Means for Metaverse Investors

Microsoft (MSFT -1.84%) has made no secret of the fact that its $70 billion acquisition of Activision Blizzard (ATVI) is in part a bold bet on the metaverse.

In this video from "The Virtual Opportunities Show," recorded on Jan. 18, Fool analyst Asit Sharma and contributor Demitri Kalogeropoulos discuss what the deal could mean for other players in the space, including Roblox (RBLX -2.25%), Apple (AAPL -0.57%), and Meta Platforms (META 1.54%).

Asit Sharma: I think it's very interesting that Microsoft mentioned the metaverse today because this isn't one that you would intuitively connect with the metaverse. We think about Activision Blizzard, you're thinking about a company in most cases it's been around for a long time. You've talked about it on this show Demitri, and as a shareholder someone who has written about the company, I think you understand and have many times made this point that this is a franchise business. It's got these great long-term franchises that it manages to keep in this evergreen status. It's been a very adaptable company for the most part, maybe not in their workplace culture.

I like your explanation because it makes it a little bit easier for me to grasp what the hook is. It's really about getting people on the platform and the ease with which gaming lends itself to the metaverse. We've already seen some very interesting digital assets like Axie Infinity (AXS) explode. They combine different ideas that are centered around the metaverse with just gaming, playing games in collaborative environments, multiplayer-type environments.

I think that while I can't see it in Activision's product line just yet. I definitely can see the extension of the user base grabbing all those customers, having a huge studio at Microsoft's disposal. This is also a content deal, Microsoft needs content to continue to compete with the likes of say, Sony (SONY 0.37%) so I think that's important too. But it makes me think there is more M&A to come.

Microsoft will end up I think purchasing companies that provide the bridge between the studio content, gaming, user elements, and the metaverse, which as we've mentioned on this show, they have a proficiency in and they've developed their own applications but they are being built as more, I think corporate-facing than consumer-facing.

I still feel like they may acquire some smaller companies in the future that are consumer-facing metaverse companies. I want to say one of our viewers had asked early on the question about Microsoft acquiring a company like Roblox, which was really if that was the right, I'm trying to remember which company our viewers said would be a potential acquirer of Roblox? I think it was Microsoft.

Demitri Kalogeropoulos: But I totally agree with your idea about that I mean, I think it was about M&A in this space just going nuts. I think was just last week we talked about was the $13 billion purchase of Zynga (ZNGA). Then a week before that, we were talking about how much Facebook is pouring into Oculus in that gaming situation. I mean, there's just so much cash just flooding in there but I think I saw some comments like that on financial Twitter (NYSE: TWTR).

People talking about, well, if Activision's worth a 45% premium. What's Roblox worth? I wouldn't really look at it necessarily that way. But it does raise that question, I think about Apple, Apple too. When Microsoft makes a big move like this I just think what's Apple's answer? I don't think they would ever make them a deal like this themselves. But you don't know, of course, gaming is important to them though they lead with that almost every developer conference every time they are talking about that.

They're trying to attract a lot of developers into their platform. But I got to think this is raising a little bit of pressure on Apple to make sure it's positioning itself and spending aggressively because its peers definitely are.