Microsoft announced Tuesday a landmark $69 billion (R1 trillion) deal to buy US gaming giant Activision Blizzard, boosting its power in video games by scooping up the scandal-hit "Call of Duty" maker.
Merging with troubled but highly successful Activision will make Microsoft the third-largest gaming company by revenue, behind Tencent and Sony, Microsoft said, a major shift in the booming world of games.
"Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms," Microsoft CEO Satya Nadella said, referring to the virtual reality vision for the internet's future.
Activision, the California-based maker of "Candy Crush," has been hit by employee protests, departures, and a state lawsuit alleging it enabled toxic workplace conditions and sexual harassment against women.
Over the past seven months the company has received about 700 reports of employee concerns over sexual assault, harassment or other misconduct, in some cases separate reports about the same incident, The Wall Street Journal has reported.
Nearly 20 percent of Activision Blizzard's 9 500 employees have signed a petition calling for CEO Bobby Kotick to resign.
Kotick will continue to serve as CEO of Activision Blizzard, but once the deal closes the company will report to Phil Spencer, head of Microsoft Gaming.
The transaction - which is expected to close in fiscal year 2023 - is subject to customary closing conditions, regulatory review and Activision Blizzard's shareholder approval.
"Acquiring Activision will help jump start Microsoft's broader gaming endeavors and ultimately its move into the metaverse with gaming the first monetization piece of the metaverse in our opinion," Wedbush analysts said after the news broke.
"With Activision's stock under heavy pressure (CEO related issues/overhang) over the last few months, Microsoft viewed this as the window of opportunity to acquire a unique sset that can propel its consumer strategy forward," Wedbush added.
Microsoft has just marked 20 years of the "Halo" video game franchise that turned its Xbox console into a hit.
Xbox remains a key player in a video game industry now thought to be larger than the movie sector, with market research firm Mordor Intelligence valuing it at $173.7 billion in 2020.
The sector is booming with publisher Take-Two announcing a deal last week to acquire "Farmville" creator Zynga for $12.7 billion, in a major mobile gaming push by the maker of "Grand Theft Auto."
Troubles, meanwhile, have stacked up for Activision over its sex harassment and discrimination scandal.
In July, California state regulators accused the company of condoning a culture of harassment, a toxic work environment, and inequality.
In September the Securities and Exchange Commission launched a probe into the company over "disclosures regarding employment matters and related issues."
And two months later the Journal reported that Kotick, accused of mishandling the harassment complaints, had signaled he would consider stepping down if he failed to quickly fix the company culture. He has led the company for more than three decades.
Late last year chief operating officer Daniel Alegre pledged a 50 percent increase in female and non-binary staff over the next five years so that they will account for more than a third of Activision's workers.
Microsoft CEO Nadella spoke of safe and inclusivity in his statement announcing the Activision deal.
"We're investing deeply in world-class content, community and the cloud to usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive and accessible to all," he wrote.