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Home / Business / Microsoft Buys ‘Minecraft’ for $2.5 Billion but Founders Will Leave – Wall Street Journal
Microsoft Buys ‘Minecraft’ for $2.5 Billion but Founders Will Leave – Wall Street Journal

Microsoft Buys ‘Minecraft’ for $2.5 Billion but Founders Will Leave – Wall Street Journal

Updated Sept. 15, 2014 10:50 a.m. ET

‘Minecraft,’ introduced in 2009, has sold more than 50 million copies for PCs, smartphones and videogame consoles. EPA

Microsoft Corp. MSFT -0.89% Microsoft Corp. U.S.: Nasdaq $ 46.28 -0.42 -0.89% Sept. 15, 2014 11:34 am Volume (Delayed 15m) : 12.80M P/E Ratio 17.40 Market Cap $ 384.76 Billion Dividend Yield 2.42% Rev. per Employee $ 677,570 09/15/14 Microsoft Buys ‘Minecraft’ for… 09/15/14 Minecraft’s Notch: ‘I Can’t Be… 09/15/14 Stocks to Watch: Cognizant, Ra… More quote details and news » MSFT in Your Value Your Change Short position agreed to buy the company behind the hit videogame “Minecraft” for $ 2.5 billion, but the startup’s founders and top executives won’t be joining the software giant.

The deal for Mojang AB will give Microsoft an asset with a loyal and largely young following. But it is also a surprising acquisition for Satya Nadella, who took over in February as Microsoft’s chief executive. He has said the company needs to double down on what the company does best—selling software to companies.

More on the Minecraft Deal

The acquisition, expected to close late this year, also means a hefty windfall for Markus Persson, the 35-year-old Swede who created “Minecraft” and has became a cult hero in the independent game community in part for his willingness to bash big companies, including at times Microsoft. Mojang, which has earned more than $ 100 million in profit from selling “Minecraft” and related merchandise, only has about 40 employees, and Mr. Persson and two other executives are the only shareholders and board members.

In a statement Monday, Mojang said Minecraft had grown from a simple and small game into a “project of monumental significance.”

The Mojang team will join Microsoft Studios, but the company’s founders—Mr. Persson, Chief Executive Carl Manneh, and Jakob Porser —are leaving to start new projects.

Recent online postings by Mr. Persson on Twitter and forums like Reddit suggest that the Stockholm-born programmer has been growing tired of answering to Minecraft’s fans, and that managing the popular game has been getting increasingly difficult for the small game studio.

“It was never [Mr. Persson’s] intention for it to get this big,” Mojang said on Monday, adding that the pressure of owning Minecraft had become a burden for the founder. “Over the past year, he’s made attempts to work on smaller projects, but the pressure of owning Minecraft became too much for him to handle.”

“It’s not about the money,” Mr. Persson said Monday in a post on his personal website. “It’s about my sanity.”

“Minecraft,” introduced in 2009, has sold more than 50 million copies for PCs, smartphones and videogame consoles like Microsoft’s Xbox. The game has drawn in middle-school children and veteran videogame fans eager for the chance to build sprawling worlds from Lego-like digital blocks. The brand also has licensing deals with Scholastic Corp. SCHL -0.43% Scholastic Corp. U.S.: Nasdaq $ 34.43 -0.15 -0.43% Sept. 15, 2014 11:30 am Volume (Delayed 15m) : 19,726 P/E Ratio 25.11 Market Cap $ 1.12 Billion Dividend Yield 1.74% Rev. per Employee $ 187,866 07/24/14 Morning MoneyBeat: Earnings Se… 07/24/14 Scholastic Profit, Revenue Ris… More quote details and news » SCHL in Your Value Your Change Short position for handbooks, Lego A/S for toys and Warner Bros. for a coming feature film.

The quick rise of “Minecraft” from a cult game to the target of one of the world’s largest corporations shows how new forms of entertainment, especially on smartphones or other emerging computing devices, are shaking up the media and technology industries. Companies that didn’t exist a few years ago, including Mojang, virtual-reality headset maker Oculus Rift and mobile-messaging service WhatsApp Inc., have been sold for multibillion-dollar prices in recent months.

Mojang said it has been working closely with Microsoft over the years and that the company belongs to “only a handful of potential buyers with the resources to grow Minecraft on a scale that it deserves.”

While Microsoft owns the Xbox console as well as operating systems for phones and mobiles, Mojang said there is no reason for development, sales and support of Minecraft for competing platforms to cease.

While Microsoft’s Xbox business has been a secondary focus for Mr. Nadella, he has emphasized how games are among the most popular activities on computers and smartphones. Microsoft’s ownership of “Minecraft” could give people extra incentive to latch on to its Xbox videogame consoles, PCs and phones.

Mojang is particularly important for Microsoft’s struggling smartphone business. “Minecraft” is among the most popular mobile apps, but the company hasn’t made a version for Microsoft’s Windows Phone system, which powers fewer than three out of every 100 new smartphones sold world-wide.

“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, given that 40% of Minecraft’s units are on mobile platforms,” Nomura analyst Rick Sherlund said in a research note last week.

Mr. Sherlund also said Microsoft could make unique or exclusive “Minecraft” content only for the company’s properties like Xbox or Windows Phone.

The “Minecraft” brand’s potential value for Microsoft is far more strategic than financial, where it will scarcely make a dent. Annual revenue from “Minecraft,” which was 2.07 billion Swedish kroner ($ 290 million) last year, is less than 1% of Microsoft’s fiscal 2014 sales of $ 86.8 billion.

The acquisition isn’t much of a financial risk for Microsoft, whose operations generate enough cash in roughly a month to pay for the Mojang purchase. Microsoft said it expects the deal to break even in fiscal year 2015.

There is, however, a risk of alienating investors already dubious about Microsoft’s deal-making strategy.

Many Microsoft stockholders remain annoyed by the company’s $ 9.5 billion acquisition this spring of Nokia Corp.’s phone-and-tablet business. Mr. Nadella’s predecessor, Steve Ballmer, agreed to the deal, but now it is the new CEO’s job to harness Nokia to help Microsoft play catch-up in smartphones.

—Evelyn M. Rusli, Sven Grundberg and Michael Calia contributed to this article.

Write to Shira Ovide at shira.ovide@wsj.com


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