Investors following Microsoft's (MSFT 1.44%) proposed $69 billion deal to buy Activision Blizzard (ATVI) have been taken on a non-stop thrill ride worthy of one of the company's flagship games. The blockbuster combination has attracted a lot of attention, with many questioning whether regulators would allow the tie-up over fears that it would stifle competition.
After a couple of high-profile setbacks in recent months, the merger scored a much-needed win today when the European Commission -- the executive body of the European Union (EU) -- approved the deal. Microsoft made a number of concessions to appease antitrust concerns.
With an important victory in the win column, does that make Microsoft stock a buy? Let's take a step back to see what the evidence suggests.
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Approval, but with strings attached
During its deliberations, the European Commission considered several aspects of the deal and its impact on EU consumers. The antitrust watchdog found that the combined company wouldn't harm competition with respect to consoles or multi-game subscription services. However, regulators raised concerns regarding the impact of the deal on cloud gaming services -- a market which is still in its infancy.
In order to allay these concerns, Microsoft proposed -- and the commission accepted -- a remedy of providing free licenses for Activision games for a period of 10 years to cloud gaming competitors in the European Economic Area. The commission further noted that Activision would have "no incentive" to withhold its games from rival Sony, which it noted was "the leading distributor on console game worldwide," as Microsoft stood to lose as much as 80% of its sales in the market.
Not out of the woods yet
Today's win notwithstanding, the Microsoft Activision deal still has a long way to go before it crosses the finish line.
Just last month, the deal hit a major hurdle when the United Kingdom's (U.K.s) Competition and Markets Authority (CMA), blocked the acquisition. The UK regulators said they feared the deal would "alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come."
In the wake of that decision, Activision Blizzard hired eminent attorney Lord David Pannick KC, one of the most accomplished and widely respected barristers in Britain, to represent the company at the Competition Appeal Tribunal.
Pannick has successful handled a number of high-profile cases in the UK and is "widely seen as one of the top barristers of his generation," according to the Financial Times, with well-known clients including Queen Elizabeth II and former Prime Minister Boris Johnson.
Another specter hanging over the deal is the move by the U.S. Federal Trade Commission (FTC) late last year to block the acquisition. In its ruling, the FTC suggested Microsoft could withhold popular Activision Blizzard games, including its wildly popular Call of Duty, to lure players away from the competition.
Microsoft is appealing the decision.
Is Microsoft a buy?
Setting aside the Activision Blizzard acquisition, there are still plenty of reasons to buy Microsoft stock.
It has a diverse line of complimentary businesses that provide a firm foundation for current and future growth. Microsoft offers enterprise software, personal computing products, and cloud computing products which, overall, tend to be resilient even in the toughest of markets.
For the first nine months of its fiscal 2023, (ended March 31), Microsoft's revenue grew 6% compared to the prior-year period, even during the toughest economic headwinds in more than decade -- even as rivals have suffered revenue declines. Much of the company's revenue is recurring in nature, which helps provide a firm foundation for future growth.
Microsoft has also been working to bolster the performance of its Bing search engine, which is now infused with artificial intelligence (AI). Management estimates that for every 1% of worldwide search market share it wins from Alphabet's Google, the company gains a $2 billion revenue opportunity.
Then there's Microsoft's dividend, which currently yields 0.88%. The company has amassed an unbroken streak since it started its payout in 2003, and has increased the dividend by an impressive 750%. Furthermore, Microsoft uses just 28% of its profits to fund the payout, so the company has the ability to continue to increase the dividend for the foreseeable future.
With all that going for it, Microsoft is a buy -- whether the Activision Blizzard deal goes through or not.
