Merging with troubled Activision will make Microsoft the third-largest gaming company by revenue, behind Tencent and Sony.
Microsoft has bought the gaming company Activision Blizzard for $68.7 billion, gaining access to blockbuster games like “Call of Duty" and ”Candy Crush."
Tuesday's all-cash deal will turn Microsoft, maker of the Xbox gaming system, into one of the world's largest video game companies.
"This acquisition will accelerate the growth in Microsoft's gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse," Microsoft said in a statement.
The merge will also help the company compete with tech rivals such as Meta, formerly Facebook, in creating immersive virtual worlds for both work and play.
Activision 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 Activision has received about 700 reports of employee concerns over sexual assault or harassment or other misconduct, The Wall Street Journal has reported.
Microsoft CEO Satya Nadella said in a conference call with investors "the culture of our organisation is my number one priority."
"It’s critical for Activision Blizzard to drive forward on its commitments to improve its workplace culture," Nadella added.
Nearly 20 percent of Activision Blizzard's 9,500 employees have signed a petition calling for CEO Bobby Kotick to resign.
However, Kotick will retain his role, and he and his team will maintain their focus on driving efforts to further strengthen the company’s culture and accelerate business growth.
Big gaming investments
Wall Street saw the acquisition as a big win for Activision Blizzard Inc. and shares soared 27 percent in early trading on Tuesday.
Shares of Microsoft slipped less than 1 percent.
Microsoft has been making big investments in gaming in recent years.
Tuesday's deal follows Microsoft's $7.5 billion acquisition last year of ZeniMax Media, the parent company of video game publisher Bethesda Softworks, which is behind popular video games The Elder Scrolls, Doom and Fallout.
Microsoft said in both cases that the deals will help beef up its Xbox Game Pass game subscription service.
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