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Microsoft Corp MSFT

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Morningstar’s Analysis

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Microsoft Creates Gaming Powerhouse With Activision Acquisition; FVE Still $345

Dan Romanoff, CPA Senior Equity Analyst

Analyst Note

| Dan Romanoff, CPA |

Wide-moat Microsoft has announced its largest deal ever: the acquisition of Activision Blizzard, one of the biggest video game publishers in the world, in an all-cash transaction valuing the target at $68.7 billion in enterprise value, or $95 per share. Given Microsoft's $2.3 trillion market capitalization, we do not view this deal as transformative, especially since stand-alone Microsoft was already a key player in video games. While Microsoft is paying a 45% premium to Activision Blizzard's previous closing price, the $95 valuation squares with Morningstar's $92 predeal fair value estimate and management expects the deal to be immediately accretive to non-GAAP EPS. We are maintaining our $345 fair value estimate for Microsoft.

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Company Profile

Business Description

Microsoft develops and licenses consumer and enterprise software. It is known for its Windows operating systems and Office productivity suite. The company is organized into three equally sized broad segments: productivity and business processes (legacy Microsoft Office, cloud-based Office 365, Exchange, SharePoint, Skype, LinkedIn, Dynamics), intelligence cloud (infrastructure- and platform-as-a-service offerings Azure, Windows Server OS, SQL Server), and more personal computing (Windows Client, Xbox, Bing search, display advertising, and Surface laptops, tablets, and desktops).

Contact
One Microsoft Way
Redmond, WA, 98052-6399
T +1 425 882-8080
Sector Technology
Industry Software - Infrastructure
Most Recent Earnings Sep 30, 2021
Fiscal Year End Jun 30, 2021
Stock Type Aggressive Growth
Employees 181,000

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