Posted January 26, 2022, 8:17 amUpdated on January 26, 2022 at 8:31
A year that ends with a bang. Microsoft again achieved solid sales and profits on all fronts at the end of 2021 and intends to use it to invest in video games and the building of the metaverse. “We feel very well positioned to ride what is essentially, I think, the next wave of the Internet,” Satya Nadella, the IT veteran’s boss, told an earnings conference call Tuesday.
Last week he announced his plan to take over the Activision Blizzard studios (Call of Duty, Candy Crush) with, in his scope, the metaverse, these parallel universes where human, augmented and virtual realities must merge, via the screens, augmented reality glasses and virtual reality headset. The $69 billion deal would be the largest tech M&A deal ever.
Target group and revenue record
Microsoft, the second largest market capitalization in the world, appears to have the means to achieve its ambitions. From October to December, it earned $51.7 billion in revenue and had $18.8 billion in net income — results that beat analysts’ average forecasts. The cloud, its engine, has been running at full speed. Azure, its remote computing platform, saw its revenue increase by 46% in one year. They had already increased by half in the previous quarter.
In contrast, Xbox (content and services) recorded weaker revenue growth of 10%. The games console is the second most used in the world, behind Sony’s PlayStation – which had 64.5% of the market share worldwide in 2021, according to Statista. But “the bets we’ve made on content, communities (of players) and the cloud in recent years are paying off,” assured Satya Nadella. “We had record levels of viewership and revenue this past quarter.”
In particular, he indicated that 18 million people had played Forza Horizon 5 (car racing game) and more than 20 million Halo infinite (shooting game), the franchise launched twenty years ago, which has greatly contributed to the success of Xbox. “With our planned acquisition of Activision Blizzard, we are investing to make it easier for people to play great games where they want, when they want and how they want,” the CEO added. His group hopes to integrate Activision titles into its monthly subscription service for Xbox Game Pass. The operation would make Microsoft the third largest group in the video game industry by revenue, after China’s Tencent and Japan’s Sony.
In late October, Microsoft also announced the acquisition of Two Hat, a content moderation company that was already involved in removing problematic content on Xbox. However, video games are considered the forerunners of the metaverse. The game is just one of the components of platforms like Roblox or Minecraft (which belongs to Microsoft), whose users, especially teenagers, also use simply to find themselves. “Players are already investing in their avatars and building worlds in Minecraft,” noted Satya Nadella.
The end of the pandemic, a concern
It also relies on the group’s more “traditional” activities, both to generate revenue and to create bridges with new immersive universes. Over the past quarter, the Office suite and related data storage and processing services improved their sales by 14% on the business side and 15% on the personal side. And LinkedIn, its professional social network, grew by 37%.
“On Teams there will be meetings via Mesh”, the collaboration platform in augmented or virtual reality, the manager mentioned. “These meetings start on screens, computers or mobile phones and will become increasingly immersive” with the appropriate equipment.
But some analysts express doubts about the Redmond group’s ability to move forward so quickly. Firstly, because the acquisition of Activision Blizzard will take time. So because the end of the pandemic may result in a drop in demand and thus in turnover. “We have seen many stars from the start of Covid become fallen angels”, emphasized Scott Kessler, an expert from the company Third Bridge, who is not sure that the growth of digital linked to health restrictions is “sustainable”.