Niko Partners analyst Daniel Ahmad, known to most as ZhugeEX, pointed out an important data from the latest financial report of Microsoftrelating to the last fiscal quarter: without the acquisition of Activision Blizzardi Xbox data would have been negative, resulting in -5% of revenues year on year, with a real collapse in hardware sales.
Ahmad was very clear on the matter: “The elephant in the room in this case is that if we exclude Activision Blizzard from the quarter, the revenues of the Xbox Gaming division they fell about 5% year over year, with no growth in software and services and a steep decline in hardware sales. In other words, you can see why Microsoft views mergers and acquisitions as essential to growth.”
A difficult situation
In another post Ahmad underlined how one of the most discussed topics of the last period was the collapse in hardware saleswhich according to him, however, is a misunderstanding of Xbox’s current strategy: “The push for acquisitions in recent years was motivated by the need for continuous launches on the Game Passand the expansion to PC, the cloud, and other consoles was motivated by the need to expand beyond a console base that already lagged far behind its competitors.
This doesn’t mean that Xbox should or could stop producing new hardware, but that the challenge is to succeed compensate successfully address any declines in Xbox hardware by increasing investments in software and services.
The Activision Blizzard acquisition is aimed at this goal and is why revenues grew more than 50% year over year despite the hardware decline.
We’ll have a fuller picture of how Xbox is doing next year, when Activision Blizzard’s impact is clearer.”
