Stock Review: A Look At the Deal Between Microsoft & Minecraft

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Microsoft Corporation (NASDAQ MSFT) announced this week that it paid $2.5 billion to acquire Swedish gaming company Mojang, maker of the popular Minecraft game. Analysts are starting to weigh in on that deal, and those at Morgan Stanley think it’s a smart way for the company to use its offshore cash.

Some investors may be disappointed that Microsoft is investing in its consumer business rather than enterprise, but Morgan Stanley analysts think it’s smart. Of course the one segment of Microsoft that will benefit the most from this acquisition is the Xbox business. In their report dated Sept. 15, 2014, analysts Keith Weiss and Melissa Gorham said not only will Minecraft strengthen that platform, but it will also “provide a broader entry into mobile computing across a younger base.”

The game has been downloaded 100 million times on the Xbox 360, and gamers have spent 2 billion hours playing it on the console just in the last two years. Those statistics alone make it a good addition to the company’s gaming studio, which also holds a number of other hits like Forza and Halo.

Microsoft Corporation (NASDAQ MSFT): The Minecraft Deal

Also Minecraft is the top paid app on both Android and iOS, which gives Microsoft a foothold on the two top mobile platforms. Since 40% of the downloads are on mobile platforms, this is even more significant. The company plans to keep the popular game available on all current platforms, including PCs and the PlayStation.

As a result, the Morgan Stanley team thinks the acquisition is really more about Microsoft’s ambitions in mobile computing. Gaming is CEO Satya Nadella called gaming the “single biggest digital life category, measured both in time and money spent.”

They also note that by buying Mojang, Microsoft will be able to speed up the development of Minecraft for Windows Phone. It hasn’t been developed for the mobile platform yet because of how low of a share Windows Phone has in the mobile device market.

Microsoft Corporation (NASDAQ MSFT) Business News

The analysts also suggest that Microsoft might also be able to offer exclusive content for the Xbox and / or Windows Phone, possibly drawing more consumers to its platforms.

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