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Tag: Activision Blizzard Inc

  • Microsoft closes $69 billion acquisition of Activision Blizzard after lengthy regulatory review

    Microsoft closes $69 billion acquisition of Activision Blizzard after lengthy regulatory review

    Satya Nadella, CEO of Microsoft Corp., during the company’s Ignite Spotlight event in Seoul, Nov. 15, 2022.

    SeongJoon Cho | Bloomberg | Getty Images

    Microsoft has closed its $69 billion acquisition of video game publisher Activision Blizzard, according to a regulatory filing by the company Friday. It’s Microsoft’s largest deal in its 48-year history and comes after the company quelled concerns about competition from U.K. and European regulators and gained a favorable ruling from a U.S. district judge.

    The U.K.’s Competition and Markets Authority gave its nod to the deal earlier Friday, clearing the way for the close.

    The deal gives Microsoft a hefty portfolio of video game franchises, including Call of Duty, Crash Bandicoot, Diablo, Overwatch, StarCraft, Tony Hawk Pro Skater and Warcraft. The game developer generated $7.5 billion in revenue in its latest fiscal year, a small fraction of the $212 billion in sales reeled in by Microsoft.

    “Today we start the work to bring beloved Activision, Blizzard, and King franchises to Game Pass and other platforms,” Microsoft Gaming CEO Phil Spencer said in a blog post. “We’ll share more about when you can expect to play in the coming months.”

    Activision Blizzard CEO Bobby Kotick will stay on as CEO through the end of the year.

    Microsoft CEO Satya Nadella, who took the helm in 2014, is aiming to diversify the company’s business beyond its core areas such as operating systems and productivity software. Activision has been both a partner to Microsoft and a competitor. It’s one of the few large companies that releases popular games that can cost hundreds of millions of dollars to produce.

    Regulatory pushback delayed the acquisition. When it announced the deal in January 2022, Microsoft said it expected to close the transaction by the end of June 2023. In July, the two companies agreed to extend the deadline to Oct. 18.

    The Federal Trade Commission in the U.S., the European Commission and the U.K.’s Competition and Markets Authority all raised objections to the transaction.

    Microsoft made concessions that placated European regulators. The company agreed to give consumers in the European Economic Area free licenses to stream their Activision Blizzard games, along with free licenses to streaming providers so European gamers can play the games through the cloud.

    Microsoft signed agreements with console rivals Nintendo and Sony, promising them access to Call of Duty games for 10 years. And Microsoft made similar arrangements with cloud-gaming providers, including Boosteroid, Nvidia, Nware and Ubitus.

    The FTC In July asked the San Francisco federal district court for a preliminary injunction to stop Microsoft and Activision from closing their deal before receiving full approval. But after five days of hearings, a judge sided with the two companies. The agency took the case to the U.S. Appeals Court for the 9th Circuit, which denied a motion to temporarily stop the consummation of the deal.

    Satisfying U.K. officials was more complicated. In August, Microsoft said that, assuming the deal closed, game publisher Ubisoft would receive cloud streaming rights for Activision’s games for 15 years. That change to the proposal should resolve lingering concerns about the deal, the CMA said Sept. 22.

    The FTC said Friday it still has concerns.

    “We remain focused on the federal appeal process despite Microsoft and Activision closing their deal in advance of a scheduled December appeals court hearing,” FTC spokesperson Victoria Graham said. “Microsoft and Activision’s new agreement with Ubisoft presents a whole new facet to the merger that will affect American consumers, which the FTC will assess as part of its ongoing administrative proceeding. The FTC continues to believe this deal is a threat to competition.”

    Activision ended the second quarter with $587 million in net income on $2.2 billion in revenue, which was up 34% year over year.

    WATCH: Microsoft deal with Activision Blizzard set to clear final hurdle

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  • Hollywood writers strike declared over after boards approve new contract with studios

    Hollywood writers strike declared over after boards approve new contract with studios

    LOS ANGELES — Leaders of the screenwriters union declared their nearly five-month-old strike over Tuesday after board members approved a contract agreement with studios, bringing Hollywood at least partly back from a historic halt in production.

    The governing boards of the eastern and western branches of the Writers Guild of America and their joint negotiating committee all voted to accept the deal, two days after the tentative agreement was reached with a coalition of Hollywood’s biggest studios, streaming services and production companies. After the vote they declared that the strike would be over and writers would be free to start on scripts at 12:01 a.m. Wednesday.

    Late-night talk shows — the first to go dark when writers walked out on May 2 — are likely the first shows that will resume. Scripted shows will take longer to return, with actors still on strike and no negotiations yet on the horizon.

    The writers still have to vote to ratify the contract themselves in early October, but lifting the strike will allow them to work during that process, the guild told members in an email.

    After Tuesday’s board votes, the contracts were released for the first time to the writers, who had not yet been given any details on the deal, which their leaders called “exceptional.”

    The three-year agreement includes significant wins in the main areas writers had fought for — compensation, length of employment, size of staffs and control of artificial intelligence — matching or nearly equaling what they had sought at the outset of the strike.

    The union had sought minimum increases in pay and future residual earnings from shows of between 5% and 6%, depending on the position of the writer. The studios had wanted between 2% and 4%. The compromise deal was a raise of between 3.5% and 5%.

    The guild also negotiated new residual payments based on the popularity of streaming shows, where writers will get bonuses for being a part of the most popular shows on Netflix
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    Max and other services, a proposal studios initially rejected. Many writers on picket lines had complained that they weren’t properly paid for helping create heavily watched properties.

    The writers also got the requirement they sought that shows intended to run at least 13 episodes will have at least six writers on staff, with the numbers shifting based on the number of episodes. They did not get their desire for guaranteed staffs of six on shows that had not yet been ordered to series, settling instead for a guaranteed three.

    Writers also got a guarantee that staffs on shows in initial development will be employed for at least 10 weeks, and that staffs on shows that go to air will be employed for three weeks per episode.

    On artificial intelligence, the writers got the regulation and control of the emerging technology they had sought. Under the contract, raw, AI-generated storylines will not be regarded as “literary material” — a term in their contracts for scripts and other story forms a screenwriter produces. This means they won’t be competing with computers for screen credits. Nor will AI-generated stories be considered “source” material, their contractual language for the novels, video games or other works that writers may adapt into scripts.

    Writers have the right under the deal to use AI in their process if the company they are working for agrees and other conditions are met. But companies cannot require a writer to use AI.

    Still-striking members of the Screen Actors Guild-American Federation of Television and Radio Artists returned to the picket lines earlier Tuesday for the first time since the writers struck their tentative deal, and they were animated by a new spirit of optimism.

    “For a hot second, I really thought that this was going to go on until next year,” said Marissa Cuevas, an actor who has appeared on the TV series “Kung Fu” and “The Big Bang Theory.” “Knowing that at least one of us has gotten a good deal gives a lot of hope that we will also get a good deal.”

    Writers’ picket lines had been suspended, but they were encouraged to walk in solidarity with actors, and many were on the lines Tuesday, including “Mad Men” creator Matthew Weiner, who picketed alongside friend and “ER” actor Noah Wyle as he has throughout the strikes.

    “We would never have had the leverage we had if SAG had not gone out,” Weiner said. “They were very brave to do it.”

    The Alliance of Motion Picture and Television Producers, which represents the studios in negotiations, chose to deal with the longer-striking writers first, and leaders of SAG-AFTRA said they had received no overtures on resuming talks. That’s likely to change soon.

    Actors also voted to authorize their leadership to potentially expand their walkout to  include the lucrative videogame market, a step that could put new pressure on Hollywood studios to make a deal with the performers who provide voices and stunts for games.

    The Screen Actors Guild-American Federation of Radio and Television Artists announced the move late Monday, saying that 98% of its members voted to go on strike against videogame companies if ongoing negotiations are not successful. The announcement came ahead of more talks planned for Tuesday.

    Acting in videogames can include a variety of roles, from voice performances to motion capture work as well as stunts. Video game actors went on strike in 2016 in a work stoppage that lasted nearly a year.

    Some of the same issues are at play in the video game negotiations as in the broader actors strike that has shut down Hollywood for months, including wages, safety measures and protections on the use of artificial intelligence. The companies involved include gaming giants Activision Blizzard
    ATVI,
    -0.05%    ,
    Electronic Arts
    EA,
    -1.13%    ,
    Epic Games, Take 2 Productions
    TTWO,
    -0.99%
    as well as Disney
    DIS,
    -1.19%
    and Warner Bros.′
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    +0.28%
    videogame divisions.

    “It’s time for the videogame companies to stop playing games and get serious about reaching an agreement on this contract,” SAG-AFTRA President Fran Drescher said in a statement.

    Audrey Cooling, a spokesperson for videogame producers, said they are “continuing to negotiate in good faith” and have reached tentative agreements on more than half of the proposals on the table.

    So far this year, U.S. consumers have spent $34.9 billion on videogames, consoles and accessories, according to market research group Circana.

    The threat of a videogame strike emerged as Hollywood writers were on the verge of getting back to work after months on the picket lines.

    The alliance of studios, streaming services and producers has chosen to negotiate only with the writers so far, and has made no overtures yet toward restarting talks with SAG-AFTRA. That will presumably change soon.

    SAG-AFTRA leaders have said they will look closely at the writers’ agreement, which includes many of the same issues, but it will not effect their demands.

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  • Microsoft’s president on fresh bid for Activision Blizzard: ‘Up to the regulators’ to decide

    Microsoft’s president on fresh bid for Activision Blizzard: ‘Up to the regulators’ to decide

    Microsoft says it “really tried” to take the concerns of U.K. regulators to heart, before launching its fresh bid to take over Activision Blizzard — and it’s now up to the regulators to decide whether that path is clear.

    “I think we need to let the regulators speak for themselves,” Microsoft’s vice-chairman and president Brad Smith told CNBC in an exclusive interview. “They have decisions that need to be made, especially in the U.K., but from my vantage point, what we’ve really tried to do is take these concerns to heart.”

    Last Tuesday, Microsoft submitted a new proposal to U.K. regulators for the takeover of American game publisher Activision Blizzard after its initial proposal was rejected.

    Microsoft and Activision have agreed to a new, restructured agreement, which the U.K.’s Competition and Markets Authority will now investigate with a decision deadline of Oct. 18.

    Microsoft submitted a new proposal to U.K. regulators for the takeover of American game publisher Activision Blizzard after its initial proposal was rejected.

    Nurphoto | Nurphoto | Getty Images

    It will be up to the regulators, especially now in the U.K., to decide whether that path is clear.

    Brad Smith

    Microsoft’s vice-chairman and president

    On regulatory concerns, Smith said: “We haven’t tried to dismiss them. We haven’t tried to downplay them. We haven’t tried to ignore them.”

    “We’ve worked to address them, and by addressing them, we have put together a transaction that will advance competition, while also eliminating the concerns on the anti-competitive side that some people had,” he told CNBC’s Martin Soong on the sidelines of the Business 20 Summit in New Delhi.

    “I think it will be up to the regulators, especially now in the U.K., to decide whether that path is clear,” he said in an interview aired Monday.

    AI will advance productivity and fundamental lines of businesses, Microsoft says

    U.K. regulators, the Competition and Markets Authority, said that under the new deal, Microsoft will not acquire cloud rights for existing Activision PC and console games, or for new games released by Activision for the next 15 years.

    Instead, French gaming publisher Ubisoft will acquire those rights before Microsoft’s acquisition of Activision, the CMA added.

    “That to me, is not just a recipe for this transaction,” said Smith.

    “I think that in the world of technology, whether we’re talking about software or hardware or pharmaceuticals, there are times when companies can come together in advance innovation, produce better products, and there may be steps that need to be taken at the same time to address regulatory concerns.”

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  • Microsoft proposes Ubisoft license to win U.K. approval for Activision Blizzard buyout

    Microsoft proposes Ubisoft license to win U.K. approval for Activision Blizzard buyout

    Microsoft will change the terms of its Activision Blizzard buyout offer in a new effort to win approval from the U.K. competition regulator.

    The regulator, the Competition and Markets Authority, said Microsoft
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    +1.71%
    will now license Activision’s global cloud streaming to Ubisoft Entertainment, for any game available now or in the next 15 years. Ubisoft, in its own release, highlighted the ability to stream the popular Call of Duty franchise.

    Financial terms were not released, but the regulator said Ubisoft will make a one-off payment and also agree a market-based wholesale pricing mechanism.

    The license will be exclusive except in the European economic area. Ubisoft would have the ability to require Microsoft to provide versions of games on operating systems other than Windows, such as Linux.

    Ubisoft shares
    UBI,
    +5.80%
    jumped nearly 5% in opening Paris trade.

    The regulator now says it’s inviting comments on the structure of the new offer. “This is not a green light. We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments,” said the regulator’s CEO, Sarah Cardell.

    Microsoft last year agreed to buy Activision Blizzard for $68.7 billion, or $95 per share. Activision stock
    ATVI,
    +0.28%
    closed Monday at $90.72.

    In a blog post, Microsoft Vice Chair Brad Smith said it anticipates the CMA review processes can be completed before the 90-day extension in its acquisition agreement with Activision Blizzard expires on Oct.18. He also said the deal with Ubisoft was carefully structured not to interfere with an existing deal struck with European regulators.

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  • Microsoft submits new Activision Blizzard takeover deal to British regulator after initial block

    Microsoft submits new Activision Blizzard takeover deal to British regulator after initial block

    Microsoft logo is seen on a smartphone placed on displayed Activision Blizzard’s games character.

    Dado Ruvic | Reuters

    Microsoft on Tuesday submitted a new deal for the takeover of Activision Blizzard, offering a spate of concessions after U.K. regulators rejected its initial proposal.

    The U.S. technology giant first put forward the $69 billion acquisition of Activision in January 2022, but has since faced regulatory challenges in the U.S., Europe and U.K.

    On Tuesday, the U.K.’s Competition and Markets Authority confirmed it has blocked the original deal. However, it said Microsoft and Activision have agreed to a new, restructured agreement, which the CMA will now investigate with a decision deadline of Oct. 18.

    The Redmond tech giant anticipates the review can be completed before this time, Microsoft President Brad Smith said in a Tuesday statement.

    Under the restructured deal, Microsoft will not acquire cloud rights for existing Activision PC and console games, or for new games released by Activision during the next 15 years, the CMA said. Instead, these rights will be divested to French game publisher Ubisoft Entertainment prior to Microsoft’s acquisition of Activision, the CMA added.

    Ubisoft shares were up more than 4% in early Europe trade.

    CMA blockade

    The CMA has been the toughest critic of the takeover, citing concerns that the deal would hamper competition in the nascent cloud gaming market.

    Cloud gaming is seen as the next frontier in the industry, offering subscription services that allow people to stream games just as they would movies or shows on Netflix. It could even remove the need for expensive consoles, with users playing the games on PCs, mobile and TVs instead.

    Regulators previously argued that Microsoft could also take key Activision games, like Call of Duty, and make them exclusive to Xbox and other Microsoft platforms.

    Authorities in the European Union were the first major regulator to clear the deal back in May. To cross that line, Microsoft offered concessions, such as offering royalty-free licenses to cloud gaming platforms to stream Activision games, if a consumer has purchased them.

    The CMA refused similar measures at the time, which it felt would allow Microsoft to “set the terms and conditions for this market for the next ten years.”

    In the U.S., the Federal Trade Commission was fighting a legal battle with Microsoft in an effort to get the Activision takeover scrapped. In July, a judge blocked the FTC’s attempt to do so, clearing the way for the deal to go ahead in the U.S.

    Just hours later, the CMA said it was “ready to consider any proposals from Microsoft to restructure the transaction” and allay the regulator’s concerns.

    Microsoft’s new proposal to the U.K.

    The restructured deal and cloud rights divestment to Ubisoft are intended to provide an independent third-party content supplier with the ability to supply Activision’s gaming content to all cloud gaming service providers, including to Microsoft itself.

    Ubisoft will be able to license out Activision content under different business models, including subscription services.

    The deal would also require Microsoft to provide versions of games on operating systems other than Windows, which it owns.

    “Microsoft has notified a new and restructured deal, which is substantially different from what was put on the table previously,” Sarah Cardell, CEO of the CMA, said in a statement.

    “As part of this new deal, Activision’s cloud streaming rights outside of the EEA (European Economic Area) will be sold to a rival, Ubisoft, who will be able to license out Activision’s content to any cloud gaming provider. This will allow gamers to access Activision’s games in different ways, including through cloud-based multigame subscription services.”

    Cardell emphasised this is not a signal of an approval for the deal.

    “This is not a green light. We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments.”

    For its part, Microsoft will be compensated for its divestment to Ubisoft “through a one-off payment and through a market-based wholesale pricing mechanism, including an option that supports pricing based on usage. It will also give Ubisoft the opportunity to offer Activision Blizzard’s games to cloud gaming services running non-Windows operating systems,” Smith said Tuesday.

    “We’re dedicated to delivering amazing experiences to our players wherever they choose to play,” Chris Early, senior vice president of strategic partnerships and business development at Ubisoft, said on Tuesday. “Today’s deal will give players even more opportunities to access and enjoy some of the biggest brands in gaming.”

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  • CNBC Daily Open: The long-awaited recession might not arrive

    CNBC Daily Open: The long-awaited recession might not arrive

    People walk past the New York Stock Exchange (NYSE) on July 12, 2023 in New York City.

    Spencer Platt | Getty Images News | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Waiting for earnings
    U.S. stocks     made slight gains Monday, but trading volume was lower than average as investors braced for second-quarter earning. European markets, on the other hand, fell. The regional Stoxx 600 index declined 0.6% as most sectors and bourses in the region fell.

    Separating the wheat from the people
    Russia terminated the Black Sea Grain Initiative, which allowed Ukraine to export food and fertilizers from three Ukrainian ports, hours before the agreement expired. The prices of wheat, corn and soybean all rose on the news. U.N. Secretary-General Antonio Guterres previously described the deal as “indispensable” to global food security.

    Merger bonanza
    Warren Buffett’s Berkshire Hathaway reduced its stake in Activision Blizzard from 6.7% last year to 1.9% yesterday, according to a securities filing released Monday. The news comes as Microsoft inches closer to completing its $68.7 billion acquisition of Activision. Buffett previously revealed Berkshire added to its initial Activision stake in a bet the deal would close and cause shares to rise.

    Unraveling the Thread
    Meta’s Threads, its rival to Twitter, launched to great excitement. But not everyone is thrilled. House Judiciary Chair Jim Jordan has asked Meta CEO Mark Zuckerberg to hand over documents about content moderation on Threads, according to a letter obtained exclusively by CNBC. The request is related to an ongoing investigation of technology platform’s policies.

    [PRO] The S&P 5,400
    Ed Yardeni, president of Yardeni Research and previously chief investment strategist at various financial institutions, thinks the S&P 500 could go on an extended bull run and hit a record high of 5,400 within the next 18 months. Here’s why the market veteran is so optimistic.

    The bottom line

    Investors were cautiously optimistic yesterday.

    Major U.S. indexes edged up. The Dow Jones Industrial Average advanced 0.22% to hit its highest close this year. The S&P 500 gained 0.39% and the Nasdaq Composite climbed 0.93%.

    It should be noted, however, that trading volume was muted. The SPDR S&P 500 exchange-traded fund, which tracks the overall index, traded 52.4 million shares, below its 30-day average of 79.1 million.

    The slower pace of trading makes sense. Major companies are due to release their earnings reports, starting with Bank of America and Morgan Stanley on Tuesday as well as Goldman Sachs, Netflix and Tesla on Wednesday.  

    Investors braced for those reports — and they aren’t expecting good news. Analysts think second-quarter S&P 500 earnings will be more than 7% lower than they were a year ago, according to FactSet data.

    But the good news is last quarter’s earnings might be the floor. And things are looking up, not just for markets, but the economy. The long-awaited U.S. recession? Many analysts now think it’s not merely late — it might not even show up.

    With both consumer and producer price indexes cooling more than expected, “bringing inflation down to an acceptable level will not require a recession,” Goldman Sachs’ chief economist Jan Hatzius wrote, cutting his projection of a recession from 25% to 20%.

    JPMorgan Chase’s chief global markets strategist Marko Kolanovic has been skeptical of a soft landing. But even he noted that “the resilience of the US and global expansions should remain in place,” causing the bank to “downplay near-term recession risks.”

    And Ed Yardeni thinks the recession — albeit “a rolling recession,” meaning that different sectors of the economy have taken turns to contract — is already behind us. Instead, “now … we’re in a rolling recovery,” Yardeni said.

    As earnings reports are released, don’t look at companies’ figures for the past quarter. Keep an eye out for their projections for the rest of the year. We might yet see signs of hope the economy will continue growing.

     

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  • CNBC Daily Open: For banks, big profits don’t mean stock gains

    CNBC Daily Open: For banks, big profits don’t mean stock gains

    A person enters the JPMorgan Chase headquarters in New York, June 30, 2022.

    Andrew Kelly | Reuters

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Lackluster markets
    U.S. stocks     traded mixed Friday, with the Dow Jones Industrial Average the only major index to rise, though all big indexes ended in the green for the week. Asia-Pacific markets fell Monday. China’s Shanghai Composite retreated around 1.2%, leading losses in the region, after disappointing economic data.

    The Chinese economy slows
    China’s second-quarter gross domestic product grew 6.3% from a year ago, falling short of the 7.3% increase analysts had expected. Moreover, the number looks impressive on a year-on-year basis only because Shanghai was in lockdown this time last year. When tabulated month over month, GDP grew only 0.8%, much slower than the 2.2% increase in the first quarter.

    Caged bird
    Twitter’s experiencing negative cash flow because of an approximately 50% drop in advertising revenue and “heavy debt,” Elon Musk said Saturday morning. Musk, who is Twitter’s CTO and executive chairman, told a BBC reporter in April that the company’s “roughly breakeven” and expected to have positive cash flow within the next quarter.

    Thawing Activision Blizzard deal
    Microsoft’s one step closer to acquiring Activision Blizzard. The U.S. Appeals Court on Friday denied the Federal Trade Commission’s motion to stop the $68.7 billion deal, while Britain’s competition regulator said it would consider Microsoft’s proposals to “restructure the transaction.” Meanwhile, Sony’s signed a 10-year agreement with Microsoft to keep Activision’s Call of Duty on the PlayStation console.

    [PRO] Retail therapy
    China’s economy may be slowing, but the country’s “premium” spenders are still splashing out on goods, according to Bernstein. The private wealth management firm estimates there are 263 million people in that category, who are spending on products from these companies and potentially boosting their shares.

    The bottom line

    Despite big banks posting solid earnings for their second quarter, they didn’t reap rewards in stock markets Friday.

    Citigroup’s earnings and revenue beat expectations. Its shares sank 4.05%. Likewise, Wells Fargo reported better-than-expected earnings and revenue, and raised its guidance for full-year net interest income. Still, market response was muted. Shares of Wells Fargo slipped 0.34%

    Even JPMorgan, the grand dame of U.S. banks, didn’t manage to rouse investor interest. Its net income soared 67% year over year; its stock inched up 0.6%.

    Why aren’t investors more excited about banks?

    The memory of March’s banking turmoil, I think, still lingers. Higher interest rates may benefit big banks because their deposits are relatively sticky compared with those at regional banks — such as the ill-fated Silicon Valley Bank.

    But high rates are also deepening commercial real estate debt, impeding dealmaking and lowering loan demand — all headwinds for banks, regardless of their size. It’s hard, in other words, to muster enthusiasm over banks when rates are still at historically high levels.

    Another reason for the disinterest in the banking sector, I think, is because stocks are essentially promises of future earnings. And there’s nothing new or exciting that banks can do, really, to generate income.

    In fact, I’d argue that banks are supposed to be boring. No one wants the place where they entrust their money to be exciting. The banks that collapsed this year were all, loosely speaking, deviating from boring banking business: Focusing on tech startups, the crypto industry, or — in the case of Credit Suisse — just straightforwardly plagued by scandals.

    It’s maybe not a bad thing, then, that investors aren’t piling into big banks.

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  • Cramer: The Cassandras are wrong about the market (again) — here’s why I’m upbeat

    Cramer: The Cassandras are wrong about the market (again) — here’s why I’m upbeat

    Visitors around the ‘Charging Bull’ statue near the New York Stock Exchange (NYSE) in New York, US, on Thursday, June 29, 2023.

    Victor J. Blue | Bloomberg | Getty Images

    The boogeymen continue to be fictional, despite endless attempts to drum up fear and hasten the departure of millions of scared investors. I’m calling the endless negative prattle the “Bear Bilge,” the stuff thrown at us that seems so cerebral and intellectual, but just turns out to miss the mark.

    I’m being plenty genteel in that summary. I won’t stay that way.

    You know my thesis by now. There are dozens of commentators who come on-air and posit the “hard landing” scenario for the economy, making it clear that we are indeed on the eve of destruction. These Cassandras are from two camps. The first is made up of negative analysts who dug in their heels and overstayed their welcome. The second group is wealthy hedge fund managers and individuals who see no harm in generating chills simply because they don’t think they are doing so. They regard their fear-mongering as first class advice that can’t possibly have consequences. I get that. If the market crashes they will be lauded for a lifetime. if it percolates, big deal — they didn’t tell you to sell, they just told you not to buy. 

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  • CNBC Daily Open: For banks, big profits don’t mean market gains

    CNBC Daily Open: For banks, big profits don’t mean market gains

    People walk outside of the JPMorgan Chase & Co. Headquarters on June 12, 2023. in New York.

    Eduardo Munoz Alvarez | View Press | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Lackluster markets
    U.S. stocks     traded mixed Friday, with the Dow Jones Industrial Average the only major index to rise, though all big indexes ended in the green for the week. European markets closed lower after five positive sessions. The benchmark Stoxx 600 index retreated 0.11%, dragged down by telecom stocks after downbeat news from Nokia and Ericsson.

    Biggest bank gets bigger
    JPMorgan Chase’s second-quarter net income surged 67% to $14.5 billion, or $4.75 per share. When excluding its acquisition of First Republic, earnings were $4.37 per share. Revenue grew 34% to hit $42.4 billion, boosted by a 44% jump in net interest income. All figures beat Wall Street’s estimates — and the bank’s own, causing it to raise its expectations for the full year’s net interest income.

    Caged bird
    Twitter’s experiencing negative cash flow because of an approximately 50% drop in advertising revenue and “heavy debt,” Elon Musk said Saturday morning. Musk, who is Twitter’s CTO and executive chairman, told a BBC reporter in April that the company’s “roughly breakeven” and expected to have positive cash flow within the next quarter.

    Thawing Activision Blizzard deal
    Microsoft’s one step closer to acquiring Activision Blizzard. The U.S. Appeals Court on Friday denied the Federal Trade Commission’s motion to stop the $68.7 billion deal, while Britain’s competition regulator said it would consider Microsoft’s proposals to “restructure the transaction.” Meanwhile, Sony’s signed a 10-year agreement with Microsoft to keep Activision’s Call of Duty on the PlayStation console.

    [PRO] Ripple effects
    A judge in the Southern District of New York ruled Thursday that Ripple’s XRP token is “not necessarily a security on its face.” That’s a win not just for Ripple, a crypto company, but the wider industry. CNBC Pro’s Tanaya Macheel explains what the case means for crypto companies like Coinbase.

    The bottom line

    Despite big banks posting solid earnings for their second quarter, they didn’t reap rewards in stock markets Friday.

    Citigroup’s earnings and revenue beat expectations. Its shares sank 4.05%. Likewise, Wells Fargo reported better-than-expected earnings and revenue, and raised its guidance for full-year net interest income. Still, market response was muted. Shares of Wells Fargo slipped 0.34%

    Even JPMorgan, the grand dame of U.S. banks, didn’t manage to rouse investor interest. Its net income soared 67% year over year; its stock inched up 0.6%.

    Why aren’t investors more excited about banks?

    The memory of March’s banking turmoil, I think, still lingers. Higher interest rates may benefit big banks because their deposits are relatively sticky compared with those at regional banks — such as the ill-fated Silicon Valley Bank.

    But high rates are also deepening commercial real estate debt, impeding dealmaking and lowering loan demand — all headwinds for banks, regardless of their size. It’s hard, in other words, to muster enthusiasm over banks when rates are still at historically high levels.

    Another reason for the disinterest in the banking sector, I think, is because stocks are essentially promises of future earnings. And there’s nothing new or exciting that banks can do, really, to generate income.

    In fact, I’d argue that banks are supposed to be boring. No one wants the place where they entrust their money to be exciting. The banks that collapsed this year were all, loosely speaking, deviating from boring banking business: Focusing on tech startups, the crypto industry, or — in the case of Credit Suisse — just straightforwardly plagued by scandals.

    It’s maybe not a bad thing, then, that investors aren’t piling into big banks.

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  • Microsoft and Sony sign deal to keep Activision’s Call of Duty on PlayStation

    Microsoft and Sony sign deal to keep Activision’s Call of Duty on PlayStation

    Game enthusiasts and industry personnel walk between the Microsoft Xbox and Sony PlayStation exhibits at the E3 trade show on June 16, 2015 in Los Angeles, California.

    Christian Petersen | Getty Images

    Sony has signed a binding, 10-year agreement with Microsoft to keep Call of Duty on its PlayStation gaming consoles after closing the Activision Blizzard acquisition, Microsoft said on Sunday.

    “We are pleased to announce that Microsoft and PlayStation have signed a binding agreement to keep Call of Duty on PlayStation following the acquisition of Activision Blizzard,” Microsoft Gaming CEO Phil Spencer said on Twitter Sunday.

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    Activision is the maker of the best-selling Call of Duty lineup. Regulators around the world had expressed significant concern about Microsoft’s power over the gaming market if an Activision acquisition was approved.

    Microsoft is the manufacturer of the Xbox, which competes directly with Sony’s PlayStation, prompting fears that Microsoft would be able to make games “exclusive” to its own consoles and displace Sony from competition.

    The deal does something to ameliorate those concerns, although Microsoft and Sony aren’t disclosing the duration of the agreement. A Microsoft spokesperson noted the deal was in place for the long term. The company has signed similar deals in the past.

    Anti-competitive concerns were shared by the CEO of Sony’s interactive entertainment division, Jim Ryan, as recently as last month. Ryan, whose portfolio includes PlayStation, said that he thought the proposed Activision Blizzard acquisition was not good for competition in videotaped June testimony.

    Microsoft vice chair Brad Smith said on Twitter Sunday that even after a potential deal closes, Microsoft “will remain focused on ensuring that Call of Duty remains available on more platforms and for more consumers than ever before.”

    The acquisition isn’t certain to close, although Microsoft and Activision’s prospects are markedly better after a federal appeals judge prevented the Federal Trade Commission from temporarily blocking the deal. The FTC had sued to stop the deal in San Francisco federal court in July but had failed to convince a judge that the deal would pose a sufficient anti-competitive risk.

    Regulators in the EU signed off on the deal in May. The U.K.’s Competition and Markets Authority, which has forced divestitures and blocked prior tech deals, said on Wednesday that it was prepared to negotiate with Microsoft over the terms of the deal.

    The two companies are aiming to complete their transaction by Tuesday, July 18.

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  • Federal appeals court denies FTC bid to pause Microsoft-Activision deal

    Federal appeals court denies FTC bid to pause Microsoft-Activision deal

    A federal appeals court late Friday denied the Federal Trade Commission’s bid to temporarily block Microsoft Corp.’s
    MSFT,
    +0.75%
    $68.7 billion acquisition of videogame publisher Activision Blizzard Inc.
    ATVI,
    +0.59%    ,
    clearing the path for the biggest gaming deal in the U.S. The 9th Circuit U.S. Court of Appeals ruling means only U.K. regulators can stop the closing of the deal before a July 18 deadline. On Tuesday, a federal judge in San Francisco ruled against the FTC, which sued to block the deal in December, prompting the FTC’s appeal on Wednesday. “We appreciate the Ninth Circuit’s swift response denying the FTC’s motion to further delay the deal. This brings us another step closer to the finish line in this marathon of global regulatory reviews,” Microsoft President Brad Smith said in a statement. The FTC was not immediately available for comment.

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  • FTC loses appeals court bid to temporarily block Microsoft-Activision deal

    FTC loses appeals court bid to temporarily block Microsoft-Activision deal

    Satya Nadella, CEO of Microsoft

    CNBC

    In a victory for Microsoft, the U.S. Appeals Court for the 9th Circuit late on Friday denied the Federal Trade Commission’s motion to temporarily stop Microsoft from closing its $68.7 billion acquisition of video game publisher Activision Blizzard.

    Microsoft is still working to resolve concerns about the transaction from the United Kingdom’s Competition and Markets Authority. The two companies have been looking to close the deal by July 18.

    “We appreciate the Ninth Circuit’s swift response denying the FTC’s motion to further delay the deal. This brings us another step closer to the finish line in this marathon of global regulatory reviews,” Brad Smith, Microsoft’s president and vice chair, said in a statement

    A federal judge in San Francisco, after five days of court hearings, ruled against the FTC on Tuesday, and the federal agency filed its appeal on Wednesday.

    The FTC first sued to block the acquisition last December, then filed for an emergency injunction to block the completion of the deal before it could have an agency administrative law judge take it up. The FTC has argued that the transaction was anti-competitive because Microsoft might make some of its games exclusive to its own Xbox game consoles or diminish the experience of Activision games such as the popular Call of Duty titles on rival services should the deal close. Microsoft has said it would instead make the games more widely available.

    In an emergency motion filed with the 9th Circuit on Thursday, the FTC said the district judge “denied preliminary relief, applying the wrong legal standard: the court effectively required the FTC to prove its full case on the merits with the court as arbiter of the merger’s legality.” The agency requested a temporary injunction while the court considered an appeal of the district court’s conclusion.

    Under the leadership of Lina Khan, the FTC has lost other battles with technology companies, including its effort to stop Meta Platforms from buying virtual reality fitness app startup Within.

    FTC representatives did not immediately respond to requests for comment on the ruling.

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  • FTC files appeal, again seeks to block Microsoft-Activision deal

    FTC files appeal, again seeks to block Microsoft-Activision deal

    The Federal Trade Commission on Thursday asked an appeals court to temporarily block Microsoft Corp.’s $69 billion acquisition of Activision Blizzard Inc. while it challenges a ruling earlier this week green-lighting the deal.

    The FTC on Thursday asked U.S. District Judge Jacqueline Scott Corley to postpone her ruling — which she promptly denied — and also appealed to the Ninth U.S. Circuit Court of Appeals in San Francisco to pause the acquisition “to preserve the status quo” while the case is reviewed, claiming it is likely to succeed in its appeal.

    According to the filing, the FTC claims the judge applied the wrong legal standard to its request for a preliminary injunction, and erred in a number of other matters.

    The deal is set to close in the coming days, and letting it happen will “irreparably harm the public interest and the FTC,” regulators said.

    Also see: GOP blasts FTC Chair Khan as a ‘bully’ after agency’s loss in Microsoft case

    In a response filed with the court, Microsoft said the FTC “failed to carry its burden on independent, fact-based grounds” and “dragged its heels” before appealing.

    “The court has already found that it would be inequitable” to order an injunction that could lead to “the potential scuttling of the merger,” Microsoft said, in asking for the FTC’s request to be denied.

    The FTC has claimed the tie-up of a major videogame platform — Microsoft’s
    MSFT,
    +1.62%
     Xbox — with a major videogame publisher — Activision
    ATVI,
    -0.51%
     makes the wildly popular “Call of Duty,” among other titles — would be harmful to the videogame industry and consumers.

    Microsoft has pledged to keep “Call of Duty” available to Sony’s
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     PlayStation console for 10 years, and will make it available for Nintendo’s 
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     Switch and some cloud-gaming platforms.

    In her ruling clearing the deal Tuesday, Corley said the FTC did not show “this particular vertical merger in this specific industry may substantially lessen competition.”

    Bloomberg News reported late Thursday that Microsoft and Activision are considering giving up some control of their cloud-gaming business in the U.K. to win approval of British regulators, who — if the U.S. appeals court does not act — are the final hurdle to the deal closing on time.

    FTC Chair Lina Khan testified on Capitol Hill on Thursday, where Republican lawmakers assailed her actions and sharply criticized her agency’s court losses in trying to block the Microsoft-Activision deal and Meta’s
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    acquisition of a virtual-reality gaming company earlier this year.

    Read more: After Microsoft defeat, ‘toothless’ FTC needs to pick better battles if it wants to rein in Big Tech

    Also: FTC’s probe of OpenAI marks key moment in Khan’s push to rein in Big Tech

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  • FTC will appeal judge’s ruling clearing Microsoft-Activision deal

    FTC will appeal judge’s ruling clearing Microsoft-Activision deal

    The Federal Trade Commission late Wednesday filed notice that it will appeal a judge’s ruling this week that gave Microsoft Corp. the green light to proceed with its $69 billion acquisition of Activision Blizzard Inc.

    In a filing with the Ninth Circuit Court of Appeals in San Francisco, the FTC is seeking to overturn U.S. District Judge Jacqueline Scott Corley’s ruling Tuesday, which said the deal would not hurt competition.

    “The District Court’s ruling makes crystal clear that this acquisition is good for both competition and consumers,” Brad Smith, Microsoft’s vice chair and president, said in a statement.” We’re disappointed that the FTC is continuing to pursue what has become a demonstrably weak case, and we will oppose further efforts to delay the ability to move forward.” 

    The FTC has claimed the tie-up of a major videogame platform — Microsoft’s
    MSFT,
    +1.42%
    Xbox — with a major videogame publisher — Activision
    ATVI,
    -1.09%
    makes the wildly popular “Call of Duty,” among other titles — would be harmful to the videogame industry and consumers.

    “The facts haven’t changed,” an Activision spokesperson said Wednesday. “We’re confident the U.S. will remain among the 39 countries where the merger can close. We look forward to reinforcing the strength of our case in court, again.”

    Microsoft has pledged to keep “Call of Duty” available to Sony’s
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    +1.78%
    PlayStation console for 10 years, and will make it available for Nintendo’s
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    Switch and some cloud-gaming platforms.

    The deal faces a July 18 deadline, and still must gain regulatory approval in the U.K.

    Tuesday’s ruling was yet another antitrust setback for the FTC, which has failed to do much to rein in Big Tech, and one analyst told MarketWatch on Tuesday that the regulators need to do ” a much better job of picking their battles,”

    Read more: After Microsoft defeat, ‘toothless’ FTC needs to pick better battles if it wants to rein in Big Tech

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  • After Microsoft defeat, ‘toothless’ FTC needs to pick better battles if it wants to rein in Big Tech

    After Microsoft defeat, ‘toothless’ FTC needs to pick better battles if it wants to rein in Big Tech

    The U.S. Federal Trade Commission’s defeat as it sought to block Microsoft Corp.’s acquisition of videogame maker Activision Blizzard is yet another setback for an increasingly toothless regulator that needs to pick better battles with Big Tech.

    On Tuesday morning, a federal judge denied the FTC’s injunction that was seeking to block the software giant’s proposed $69 billion acquisition of Activision
    ATVI,
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    best known for its hit videogame “Call of Duty.” The FTC argued that Microsoft
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    +0.19%
    could withhold “Call of Duty” and other Activision games from rival console platforms such as Sony’s PlayStation, and keep the games on its Xbox only.

    Microsoft, in a show of faith, committed in writing to keep “Call of Duty” on PlayStation on parity with Xbox for 10 years, agreed with Nintendo
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    to bring “Call of Duty” to Switch and entered into several pacts to bring Activision content to several cloud gaming services, U.S. District Court Judge Jacqueline Scott Corley noted in her decision.

    “With these 10-year contracts that Microsoft made across the board with so many vendors, Nvidia
    NVDA,
    +0.53%    ,
    Nintendo and others, 10 years is a really long time, in my opinion,” said Sarah Hindlian-Bowler, an analyst at Macquarie Equity Research, in an interview Tuesday. “It is long enough to cover the arrival and maturity of the cloud gaming market….She understands  that 10 years is a very long long time to make a guarantee of this kind.”

    Also read: Regulators face an antitrust dilemma after Meta launches Threads

    Hindlian-Bowler said that she had been in the minority of Wall Street analysts in not believing the U.S. government would be able to block this deal.

    “The assumption that this somehow decreases the market is going to prove to be wildly incorrect,” she said, adding that she does not believe that the U.K.’s  Competition and Markets Authority will be able to block the deal either.

    The latest upset at the FTC was also not too surprising to other Capitol Hill watchers, especially in the light of other high-profile setbacks by the agency and its once-heralded commissioner, Lina Khan. When she was sworn in as chair of the FTC in mid-2021, Khan was hailed as the sheriff who would rein in Big Tech.

    “It’s hard to say I am surprised by the ruling because Khan has had a fairly unsuccessful track record,” said Owen Tedford, a senior research analyst at Beacon Policy Advisors. “The regulators are pushing the boundaries, deals that previously would have gone unchallenged have now gone challenged. And they are breaking precedent because Khan and company have expressed a dislike of settlements.”

    The FTC’s attempts to sue Meta Platforms Inc.
    META,
    +1.42%
    have had some defeats so far. In February, a California judge denied the FTC’s attempts to block Meta from buying a virtual-reality startup called Within Unlimited. The FTC’s suit to reverse Meta’s acquisitions of WhatsApp and Instagram, filed in 2021, is still plodding along.

    Additionally, the FTC recently filed a suit against Amazon.com Inc.
    AMZN,
    +1.30%    ,
    alleging that it is too difficult for consumers to cancel their Prime accounts, and the agency is reportedly also mulling another far-reaching suit against Amazon alleging that the e-commerce giant punishes merchants who do not use its logistics services. One analyst has already made a case that the FTC will lose that fight too.

    “I think that the FTC is in need of some change, in need of some refreshing and in need of doing a much better job of picking their battles,” said Hindlian-Bowler. “This does feel toothless, a lot of the fights they are picking are toothless. And unfortunately, they are missing the real battle. They are missing TikTok, they are missing the real fights where we actually have national security at risk.”

    In February, one of the Republican commissioners on the FTC resigned, and wrote an op-ed in the Wall Street Journal accusing Khan of disregarding the rule of law and due process.

    Compared to the European Union, which has had far more success implementing regulation to rein in Big Tech, the U.S. is still much weaker. “The EU seems to be having somewhat more success, levying big fines, getting these companies to change,” said Beacon’s Tedford. “The EU has passed these bills, but the U.S., despite these efforts, has not gotten there and is not going to get there for the next two years.”

    Money spent by Big Tech to lobby Congress in a huge part of the problem, whereas in Europe, “those lawmakers feel less beholden,” he added.

    More than a century ago, President Teddy Roosevelt, known for his “speak softly and carry a big stick” foreign policy, also used his bully pulpit to bust industrial monopolies.

    If Khan and her staff want to follow his lead and rein in Big Tech, they need to start picking their future battles more carefully — and carry bigger sticks.

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  • Microsoft-Activision deal moves closer as judge denies FTC injunction request

    Microsoft-Activision deal moves closer as judge denies FTC injunction request

    A federal judge in San Francisco has denied the Federal Trade Commission’s motion for a preliminary injunction to stop Microsoft from completing its acquisition of video game publisher Activision Blizzard.

    The deal isn’t completely in the clear, though. The FTC can now bring the decision to the U.S. Court of Appeals for the 9th Circuit, and the two companies must find a way forward to resolve opposition from the Competition and Markets Authority in the United Kingdom.

    “This Court’s responsibility in this case is narrow. It is to decide if, notwithstanding these current circumstances, the merger should be halted—perhaps even terminated—pending resolution of the FTC administrative action,” Judge Jacqueline Scott Corley wrote in her decision, published Tuesday. “For the reasons explained, the Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content. The motion for a preliminary injunction is therefore DENIED.”

    Microsoft CEO Satya Nadella arrives at court in San Francisco on June 28, 2023.

    Shelby Knowles | Bloomberg | Getty Images

    Activision Blizzard shares reached a session high and 52-week high of $92.91 per share after the U.S. District Court for the Northern District of California issued the decision. Microsoft had agreed to buy the game publisher for $95 per share. Activision Blizzard stock ended Tuesday’s trading session at $90.99 per share, up 10%.

    “We’re optimistic that today’s ruling signals a path to full regulatory approval elsewhere around the globe, and we stand ready to work with UK regulators to address any remaining concerns so our merger can quickly close,” Activision Blizzard CEO Bobby Kotick wrote in a memo to employees.

    Microsoft also hailed the decision.

    “We’re grateful to the court in San Francisco for this quick and thorough decision and hope other jurisdictions will continue working towards a timely resolution,” Brad Smith, Microsoft’s president and vice chair, said in a statement. “As we’ve demonstrated consistently throughout this process, we are committed to working creatively and collaboratively to address regulatory concerns.”

    The decision comes after five days of court hearings to assess whether Microsoft would be able to complete the $68.7 billion Activision Blizzard acquisition it announced in 2022. The judge was deciding whether to grant the FTC’s request for an emergency injunction to prevent the deal from closing.

    The FTC argued Microsoft has shown an interest in making some games exclusive, to prevent them from appearing on Sony’s PlayStation or Nintendo’s Switch, and that it might do so if the deal were to close. But Microsoft said the company would want to make Activision’s titles more widely available, rather than less, partly to grow from people subscribing to its Game Pass library of games. Kotick and Microsoft CEO Satya Nadella both testified, as did executives from Alphabet, Nvidia and Sony.

    In December the FTC filed suit to block the deal and have an administrative law judge at the agency assess it. But in June, before that could happen, the FTC requested a preliminary injunction to prevent Microsoft from completing the acquisition, with an eye toward bringing the case to its administrative law judge on Aug. 2. The two companies were looking to close the deal by July 18.

    “We are disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles. In the coming days we’ll be announcing our next step to continue our fight to preserve competition and protect consumers,” an FTC spokesperson said.

    Kotick said during the hearings that the Activision Blizzard board didn’t see how the deal could continue if the judge were to grant the preliminary injunction.

    The judge modified the temporary restraining order she imposed in June so that it ends at 11:59 p.m. on July 14, unless the FTC gets a stay pending appeal from the 9th Circuit.

    Meanwhile, the two companies are turning their attention back toward Europe.

    “After today’s court decision in the U.S., our focus now turns back to the UK. While we ultimately disagree with the CMA’s concerns, we are considering how the transaction might be modified in order to address those concerns in a way that is acceptable to the CMA,” Smith said in a statement. “In order to prioritize work on these proposals, Microsoft and Activision have agreed with the CMA that a stay of the litigation in the UK would be in the public interest and the parties have made a joint submission to the Competition Appeal Tribunal to this effect.

    Microsoft and the CMA have agreed on a small divestiture to address the regulator’s concerns, CNBC’s David Faber reported.

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  • Microsoft-Activision ruling highlights Lina Khan’s struggles to fight tech

    Microsoft-Activision ruling highlights Lina Khan’s struggles to fight tech

    FTC Chairwoman Lina Khan testifies during the House Energy and Commerce Subcommittee on Innovation, Data, and Commerce hearing titled “Oversight of the Securities and Exchange Commission,” in Rayburn Building on Tuesday, April 18, 2023.

    Tom Williams | Cq-roll Call, Inc. | Getty Images

    When a federal judge on Tuesday decided to reject the Federal Trade Commission’s request for a preliminary injunction to prevent Microsoft from completing its acquisition of Activision Blizzard, she also rejected FTC Chair Lina Khan’s vision of antitrust enforcement.

    While the judge’s ruling doesn’t mean the deal is totally in the clear, since the FTC can appeal and the UK’s competition enforcer has also opposed the deal, it’s indicative of the existential challenge Khan’s enforcement strategy faces in the courts.

    Fighting the $68.7 billion deal has been one of the FTC’s biggest swings yet under Khan, who President Joe Biden named chair in 2021. Khan first emerged in antitrust circles for her critiques of how antitrust enforcement overlooked potential abuses by Amazon.

    But even as many in Congress have become more open to a different view of antitrust in the digital age, the courts still pose a major hurdle to newer theories about how online companies can amass and leverage power to stifle rivals.

    Judge Jacqueline Scott Corley wrote that the FTC had not shown it was likely to prevail in its administrative challenge of the merger in its internal proceeding, based on the agency’s view that the deal is likely to substantially lessen competition. The FTC has argued that Microsoft might make some of its games exclusive to its own game consoles or diminish the experience of Activision games on rival services should the deal close. Microsoft has said it would instead make the games more widely available.

    Corley agreed with Microsoft’s view.

    “To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content,” she wrote.

    She added that, “Despite the completion of extensive discovery in the FTC administrative proceeding, including production of nearly 1 million documents and 30 depositions, the FTC has not identified a single document which contradicts Microsoft’s publicly-stated commitment to make Call of Duty available on PlayStation (and Nintendo Switch).”

    The ruling means that the parties are closer to being able to complete their merger by their July 18 deadline. But the FTC can still appeal, and the companies must still contend with the UK Competition and Markets Authority’s opposition to the deal.

    “We are disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles,” an FTC spokesperson said in a statement. “In the coming days we’ll be announcing our next step to continue our fight to preserve competition and protect consumers.”

    It’s not the first time a judge has looked dubiously on the FTC’s antitrust enforcement theories under Khan. A federal judge also ruled against the FTC’s attempt to block Meta’s acquisition of virtual reality fitness app maker Within Unlimited, which the agency argued may lessen competition in a nascent market.

    Khan has continued to bring cases against tech companies that will face similar hurdles in the courts. The most notable might be the agency’s expected challenge of Amazon’s antitrust practices.

    Khan’s defenders quickly critiqued Corley’s decision. Matt Stoller, director of research at the American Economic Liberties Project, wrote on Twitter that Corley “changed the law” in writing that “the FTC must show the merger will probably substantially lessen competition.” Stoller noted that the relevant merger law says the government must show “the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.”

    “[W]hen a Biden judge – whose son works at Microsoft – lets the biggest tech merger of all time go through, we have a serious problem with the judiciary,” Stoller wrote. Corley disclosed her son’s job, which is not in the gaming division, at a hearing in June.

    Regardless of the critiques, the ruling is another example of a judge who is unconvinced of Khan’s theories of how a tech company can leverage acquisitions in adjacent markets to harm competition. That’s the case even when the judge was appointed by the same president who named Khan to the FTC.

    With new digital competition laws stalled in Congress, overcoming judges’ skepticism about newer theories on the application of existing laws will likely remain enforcers’ greatest challenge.

    Subscribe to CNBC on YouTube.

    WATCH: Judge denies FTC request for preliminary injunction to stop Microsoft-Activision deal

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  • The biggest takeaways from Microsoft’s courtroom showdown with the FTC over Activision Blizzard

    The biggest takeaways from Microsoft’s courtroom showdown with the FTC over Activision Blizzard

    Microsoft CEO Satya Nadella arrives at the U.S. DIstrict Court for the Northern District of California in San Francisco on June 28, 2023.

    Philip Pacheco | Bloomberg | Getty Images

    Microsoft and its current major acquisition target, video game publisher Activision Blizzard, have wrapped up their five days in court in San Francisco as the Federal Trade Commission sought to stop the deal from closing, but not without several fascinating facts coming to light.

    And not only about games. Information on Microsoft’s business ambitions, its process for okaying acquisitions, and its most critical rivals in cybersecurity was revealed as part of the hearing process, thanks to documents and testimony from executives. Large releases like this don’t happen every day, and in the past several years Microsoft has avoided prominent trials that can result in several notable disclosures at once.

    The FTC had originally planned to bring its case against the deal before an administrative law judge in August but then opted to seek a preliminary injunction in federal court as the agency became worried that Microsoft would try to close, even though some jurisdictions had not cleared the purchase.

    In addition to regulators in the U.S. and the United Kingdom, Sony also opposes the deal. Its PlayStation 5 console competes with the Xbox Series S and X consoles, and the company has said that anticompetitive effects would arise if Microsoft were to take control of Activision Blizzard.

    Here’s a rundown of notable facts that have trickled out in recent days and are still lingering after both parties presented their closing arguments on Thursday.

    • Mobile, mobile, mobile. The impulse to expand Microsoft’s gaming business on mobile devices at least in part inspired the Activision acquisition. “It was very imperative to us if we were going to remain [relevant and] grow relevance in the market, we were going to have to find mobile customers for Xbox,” Phil Spencer, Microsoft’s CEO of gaming, said last Friday. Revenue from mobile gaming is growing faster than revenue from gaming on PCs or consoles, and Microsoft executives repeatedly said in the hearings that the company has made little progress on building key mobile gaming content.
    • Several earlier mobile targets. Microsoft considered several other companies before choosing to buy Activision Blizzard, including FarmVille publisher Zynga, Pokemon Go developer Niantic and Japanese digital entertainment mainstays Sega Sammy and Square Enix, according to testimony and documents released in the case.
    • Interest in Asia. While Xbox consoles have a respectable market share in the U.S., they’re less popular in Japan, where Nintendo and Sony rule. A 2019 analysis Microsoft produced for a possible Square Enix bid said that “acquiring Square Enix would provide Gaming with market relevance in a region that currently lacks a meaningful Xbox presence, allowing us to reach more gamers in more geographies.”
    • Valuable incentives. Sony has paid game developers fees to discourage them from shipping games such as “Ghostwire: Tokyo” and “Deathloop” on Xbox, Microsoft executives said. Microsoft pays its own fees, and Spencer said that buying Activision Blizzard would mean Microsoft wouldn’t have to spend as much on incentives.
    • Many games under consideration. One of the more dramatic moments in the five days of hearings was when the FTC’s lead lawyer, James Weingarten, sought to push Spencer to make certain commitments on Microsoft’s part. Weingarten got Spencer to say he would not pull any future Call of Duty game from PlayStation consoles, a statement that was in keeping with what Microsoft has said for months. Then Weingarten went further, asking Spencer to do the same thing with all Activision content. Spencer did not immediately agree. Activision Blizzard publishes many other games besides Call of Duty, such as those in the Diablo and Overwatch franchises, but the bulk of the attention was on Call of Duty. Jim Ryan, CEO of Sony Interactive Entertainment, wasn’t happy with a Microsoft-generated list of Activision Blizzard games that would remain accessible on the PlayStation after the acquisition closes. “Overwatch is there, but Overwatch 2 is not on there, which is the current version of the game,” he said.
    • Microsoft’s long-range ambitions. The FTC managed to get ahold of documents Microsoft CEO Satya Nadella sent to top executives and fellow board members that laid out Microsoft’s financial goals for the current decade. The documents showed that Nadella is aiming for Microsoft to generate $500 billion by the 2030 fiscal year, with at least 10% year-over-year revenue growth. One document said Microsoft’s Security, Compliance, Identity and Management business could reach $100 billion in revenue by the 2030 fiscal year, while the company wants its Teams communication app to reach 1 billion monthly active users by then.
    • Weak hardware access. Spencer said during his testimony that Sony was reluctant to send Microsoft development kits for the PlayStation 5 before its 2020 release, and that prevented Microsoft from optimizing its Minecraft game for Sony’s current console. That put the game at a disadvantage compared with other developers, Spencer said. Ryan, from Sony, explained why his company provides development kits to Microsoft later than it does for other studios. “The commercial risks associated with this knowledge of those feature sets leaking to our principal competitor is not something that we would choose to rely on any contract to enforce,” Ryan said. Gamers can find an older version of Minecraft on the PlayStation 5.
    • Deal threshold. Amy Hood, Microsoft’s finance chief, said in written testimony for the hearing that she provides final approval for proposed deals under a certain dollar amount, but Microsoft’s board must sign off on deals valued above $500 million. Microsoft had $104 billion in cash and equivalents at the end of March, and 2022 revenue exceeded $204 billion.
    • Negotiating leverage. Microsoft was determined to ensure that Activision Blizzard’s Call of Duty games remain on Xbox for its current generation, which debuted in 2020. Bobby Kotick, Activision Blizzard’s CEO, conveyed that if Microsoft refused to provide a more favorable revenue share than the usual 70-30 split, then the games would not continue to be available, Microsoft executive Sarah Bond said. An FTC lawyer accidentally mentioned that Microsoft agreed to accept 20% instead of the typical 30%.
    • Sony’s altered expectations. In early 2022, two days after Microsoft announced its plan to buy Activision Blizzard, Ryan wrote in an email to another Sony Group executive that he was “pretty sure” Call of Duty would be available on PlayStation consoles for many years. But he appeared to lose confidence in that belief. In videotaped testimony, Ryan said he had “significant concerns” as to whether Call of Duty and other Activision Blizzard games would continue to be available on PlayStation after the transaction.
    • Kotick’s console mistake. Kotick has been in video games for decades, and he fumbled when he looked for the first time at the Nintendo Switch console and decided that it would not be successful. He had been more impressed with Nintendo’s earlier Wii console. The Switch became the third best-selling console of all time. When an FTC lawyer asked Kotick if Activision Blizzard would produce a Call of Duty game for a future Nintendo console, he said, “We missed out on the opportunity for the past generation of Switch, so I would like to think we would be able to do that, but we’d have to look.”
    • Game Pass opposition. Kotick made it clear that while Activision Blizzard has experimented with putting games in subscription libraries, he didn’t think they would lead to “sustainable long-term business.” He said he considered putting games on Game Pass in 2020 during negotiations with Microsoft over Activision Blizzard’s most recent licensing agreement, but ultimately the company decided not to go forward with it, he said. He couldn’t imagine anyone offering commercial terms that would be favorable, he said.
    • Whither Amazon? Weingarten pointed out that while Microsoft agreed to provide Call of Duty to small cloud gaming players such as Boosteroid and Ubitus, it has not done the same with Amazon, which fields the Luna cloud gaming service. Amazon is among Microsoft’s most prominent competitors in the cloud-computing business.
    • Cloud flop. Microsoft has sought to supplement PC and console gaming with a cloud-based streaming option, which is included with the Game Pass Ultimate service, along with a library of games to download and play for a monthly fee. Microsoft began testing cloud gaming with consumers in 2019. Bond testified that gamers mainly use the cloud option not with their phones but with their consoles, while they wait for downloads to finish. At that point, they switch to playing games locally, she said. The cloud gaming option is not growing and is unprofitable, Tim Stuart, finance chief for Microsoft’s Xbox division, said during his testimony. “The feedback to date is that it’s just not good enough as a — you know, definitely as a substitute to any of the current platforms,” Nadella said. “But you know, it can break through at some point, on something new, but it’s not yet happened, both on the economics as well as the content side.”
    • Sizing up cloud infrastructure. The big-picture memos from Nadella contained figures for the scale of various businesses across Microsoft, and one is more important than the others for the company’s investors. Perhaps the most closely tracked number in Microsoft’s earnings report after revenue and earnings is the growth of the Azure public cloud, because the software maker doesn’t disclose Azure revenue in dollars. One of the Nadella memos said Microsoft’s “infrastructure” revenue in the 2022 fiscal year was $34 billion. The tally was “very close to our estimates,” Bernstein Research analysts led by Mark Moerdler, with the equivalent of a buy rating on Microsoft stock, said in a Thursday note.
    • Critical security rivals. One of the documents that became publicly available as part of the hearing identified four security companies that Microsoft used to track its sprawling cybersecurity operation. The results contributed to a scorecard to assess performance among Microsoft’s top executives. Scorecard metrics included the percentage of “managed accounts with at least one Okta detection,” the percentage of “commercial Windows 10/11 MAD [monthly active devices] that have CrowdStrike components detected,” the percentage of “mail recipients that are protected by Proofpoint,” and percentage of “Commercial Windows 10/11 MAD that have Symantec DLP components detected.”
    • Exclusive exploration. Microsoft has argued that it would keep Call of Duty on PlayStation and make games in that franchise available on multiple cloud streaming services for a decade. “The acquisition’s strategic rationale and financial valuation are both aligned toward making Activision games more widely available, not less,” Hood said in written testimony. But on the fifth and final day of hearings, the FTC succeeded in getting witnesses to show that Microsoft did evaluate ways of trying to reduce the availability of Activision Blizzard content on the Sony PlayStation. Stuart confirmed that in preparation for a Microsoft board meeting, executives examined a scenario of lower sales of Activision Blizzard games on the PlayStation and ways of making up for the shortfall with sales of more Xbox consoles and Game Pass subscriptions.

    Activision Blizzard and Microsoft have agreed to terminate the deal if it’s not done by July 18. District Judge Jacqueline Scott Corley said on Thursday that she isn’t sure when she’ll decide on the preliminary injunction. “But obviously, I’m mindful,” she said.

    WATCH: Activision Blizzard CEO Bobby Kotick and Microsoft CEO Satya Nadella to testify today

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  • Judge temporarily blocks Microsoft’s $69 billion purchase of Activision

    Judge temporarily blocks Microsoft’s $69 billion purchase of Activision

    A federal judge late Tuesday approved a request by the Federal Trade Commission to temporarily block Microsoft Corp.’s $69 billion acquisition of Activision Blizzard Inc.

    U.S. District Judge Edward Davila in San Francisco issued a temporary restraining order in order to “maintain the status quo,” and set a evidentiary hearing to be held June 22-23 on whether a preliminary injunction should be issued.

    The deal was set to be finalized as soon as this Friday. Tuesday’s order said the deal may not close until at least five days after the court’s preliminary injunction ruling.

    The acquisition has raised antitrust concerns that Microsoft
    MSFT,
    +0.74%    ,
    with its Xbox gaming console, could withhold hit Activision Blizzard
    ATVI,
    +1.17%
    videogame franchises such as “Call of Duty” and “Overwatch” from competing console platforms.

    On Monday, the FTC filed for a restraining order and injunction to block the deal, arguing “a preliminary injunction is necessary to maintain the status quo and prevent interim harm to competition.”

    “This loss of competition would likely result in significant harm to consumers in multiple markets at a pivotal time for the industry,” the FTC said in its filing Monday.

    In a statement Tuesday evening, a Microsoft spokesperson said: “Accelerating the legal process in the U.S will ultimately bring more choice and competition to the gaming market. A temporary restraining order makes sense until we can receive a decision from the court, which is moving swiftly.” 

    While EU regulators approved the deal in May, British regulators have tentatively scheduled appeal hearings after saying in April they would prohibit the purchase.

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  • CNBC Daily Open: Tech is loving the possible rate pause

    CNBC Daily Open: Tech is loving the possible rate pause

    Tim Cook, chief executive officer of Apple Inc., beside an Apple Vision Pro mixed reality (XR) headset during the Apple Worldwide Developers Conference at Apple Park campus in Cupertino, California, US, on Monday, June 5, 2023.

    Philip Pacheco | Bloomberg | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    • China’s economy and stocks aren’t doing as hot as Japan’s. The Shanghai Composite fell around 0.1% and the yuan hit a 6-month low as the People’s Bank of China cut a short-term borrowing rate in an attempt to boost liquidity. Analysts think it’s a signal that the central bank will cut its medium-term and loan prime rate in the weeks ahead.
    • Goldman Sachs CEO David Solomon told CNBC that commercial real estate’s in such a bad shape that his bank will write down bad loans and drop valuations in its real estate investments. Still, Solomon said he’s “surprised” by the resilience of the U.S. economy.
    • JPMorgan Chase’s prepared to pay $290 million to settle a lawsuit brought against it by a victim of late sexual predator Jeffrey Epstein, a source told CNBC. However, the bank’s litigation with the U.S. Virgin Islands and its claims against Jes Staley, a former executive who was friends with Epstein, are still pending.

    The bottom line

    Hopes for a pause in interest rates helped to send stocks higher Monday. The technology sector, which is more sensitive to rate fluctuations, especially benefitted. (Higher rates today lower the value of tech’s growth tomorrow.)

    Traders are betting there’s a 72% chance the Federal Reserve will keep rates unchanged at this week’s meeting, according to the CME Group’s FedWatch tool. That’s because economists think the consumer price index, coming out later today, will show May’s inflation slowing to just 0.1% from the previous month, or 4% year over year. That’s a “headline number [that] is going to feel good,” said Mark Zandi, chief economist at Moody’s Analytics.

    Big Tech stocks mostly rose at least 1%; Apple even hit an all-time high of $183.79 per share. Meanwhile, Oracle’s better-than-expected earnings report pushed its shares 3% higher in extended trading.

    The Nasdaq popped 1.53% to reach its highest level since April. The S&P 500 added 0.93%, further adding to the gains it’s accumulated over the past few days, and the Dow Jones Industrial Average climbed 0.56%.

    Despite those big moves, it was a relatively light trading day. On an average day, 80.6 million shares of the SPDR S&P 500 ETF Trust, a tracker of the broad S&P 500 index, are traded. Yesterday, only 31.5 million exchanged hands. That’s probably wise, considering inflation data coming out tomorrow and the Fed meeting happening right after that. Tech greatly benefits from lower interest rates, but remember that the converse applies too.

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