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Analysts positive on Microsoft-Mojang deal

Industry-watchers say Minecraft union makes strategic sense, but some point to possible pitfalls

This morning, Microsoft confirmed reports that it would be acquiring Minecraft developer Mojang for $2.5 billion. It's a massive sum of money, but Minecraft is a massive mainstream success, and among the analysts contacted, few raised concerns that the Xbox One maker was overpaying for the property.

"At first glance, the acquisition makes strategic sense for Microsoft in terms of strengthening the games platform, but also extending the company more into the realms of cloud and mobile," Barid's Colin Sebastian said. "Clearly, Minecraft is not at the steepest point of its growth trajectory, but as an online service there is the potential for Minecraft to be successful for years to come."

Wedbush's Michael Pachter first reactions to the deal were similarly upbeat.

"It gives them an entry into mid core, can differentiate their devices, and can generate revenue for 10 years," Pachter said. "I think you will see Master Chief and Gears characters in future versions of Minecraft. It gives them another strong franchise with a desirable installed base of young people."

Nomura analyst Rick Sherlund commented on the acquisition to Reuters after rumors of the deal first spread last week.

"We don't view this acquisition as a signal of Microsoft's intent to double down on Xbox but consider it an attempt to better address mobile on a cross-platform basis," Sherlund said. "This also appears to be consistent with [Microsoft] CEO Satya Nadella's mobile and cloud strategy."

In a note to investors, Piers Harding-Rolls compared it favorably to unspecified other recent acquisitions in the market.

"Minecraft is arguably the best-positioned independently-owned IP across the games sector today," Harding-Rolls said. "While it has already generated over 54 million games sales and revenues approaching $500m, Minecraft is a franchise built to last, making the likely heavy investment required to secure Mojang significantly less risky than many other recent acquisitions within the games or app sectors."

However, not all of the sentiment was positive. Harding-Rolls added a note of caution about resistance to the deal from within the Minecraft community.

"Part of this is related to the threat of exclusivity on Microsoft-related devices, or future changes to the Minecraft experience but it is also a response to the potential acquisition of a fervently independent developer by a company of the scale of Microsoft," Harding-Rolls said. "If the acquisition comes to fruition, Microsoft's challenge will be to maintain the spirit of Minecraft while developing the franchise in a commercially meaningful way. With around 40 employees at Mojang, this is the sort of acquisition which can easily get lost in a huge organisation like Microsoft, and this factor is probably the main threat to longer term success."

SuperData CEO Joost van Dreunen also told Reuters prior to the deal being made official that $2.5 billion "seems like a lot for a title that has certainly not peaked but is certainly not in its initial frenzy." He was also skeptical that Minecraft could help drive Windows Phone sales, noting that the Minecraft experience is better on the bigger screens of tablets and PCs.

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Brendan Sinclair avatar
Brendan Sinclair: Brendan joined in 2012. Based in Toronto, Ontario, he was previously senior news editor at GameSpot.
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