With $40 billion in cash sitting in the bank, Microsoft Corp. is more than able to pounce on any software game developers it might like to acquire. The most talked-about target has been Japan's Sega Corp., which controls an impressive catalog of games and, more importantly, a large presence in its home market.
Microsoft and Sega have brushed off the long-running rumors of a takeover by the Redmond, Wash.-based software giant, yet the scuttlebutt persists, helping recently to lift Sega's stock price on the Tokyo Stock Exchange. Analysts cited the simple logic of the deal.
"It would not surprise me if Microsoft would consider the acquisition of Sega," said Drake Johnstone, an analyst at Davenport & Co. in Richmond, Va. "I would certainly concur that Microsoft will continue to develop its gaming software through both internal development and by acquiring game developers. And it will continue to expand its assets in the video game software segment."
Michael Gartenberg, research director at Jupiter Research, added that Microsoft would clearly benefit by acquiring Sega since it's become increasingly difficult for game console vendors such as Microsoft to entice independent software game developers to sign exclusive deals. Third-party publishers don't want to lose out on revenues from numerous clients.
"The alternative to getting that exclusive content is creating a lot of first-party stuff," Gartenberg said. "Certainly Microsoft is on that roll with its acquisition of Rare, so an acquisition of Sega makes a certain amount of sense."
Earlier this year Microsoft bought video game developer Rare Ltd., of Warwickshire, England, for $375 million in cash. The rationale was the hopes of boosting sales of its Xbox console via Rare's game offerings.
That's why such a deal also makes business sense in Japan. Microsoft has struggled to make inroads in the Japanese market with its Xbox console against its most ardent foes, Japan-based Sony Corp., with its Playstation 2 console, and Nintendo Company Ltd., with its GameCube console.
SOURCE:
Thedeal.com
