Just as we discovered that tech giant Microsoft (NASDAQ:MSFT) was the second company in history to achieve the $3 trillion valuation mark, we found out part of why it’s worth that much. Like a famous man once said on an episode of The Simpsons, “I didn’t get rich by writing a lot of checks.” Indeed, Microsoft now has fewer checks to write after laying off 1,900 employees, mostly from Activision-Blizzard. The move was enough for investors, who gave Microsoft a fractional boost in Thursday morning’s trading.
If that sounds like a big number, it’s because it is. 1,900 people is a lot to lose in one swath, and it’s also about 8% of the total at Microsoft Gaming. Microsoft also lost a couple of particular names out of Blizzard, including its chief design officer, Allen Adham, and its president, Mike Ybarra. Further, a survival game—which would have been Activision-Blizzard’s first new intellectual property since “Overwatch” back in 2016—has been canceled.
Trouble Under the Hood?
So what happened? While Microsoft keeps that answer close to its vest, at least for now, some signs have emerged about what’s happening. Blizzard cut off that new survival game and is instead—as noted by Matt Booty, current head of Xbox Studios—moving some of the survivors to “…one of several promising new projects Blizzard has in the early stages of development.” What those are, or when we’ll hear about them, is unclear. But Microsoft really needs to roll out something from Blizzard just to make the massive purchase of Activision-Blizzard not look like a cash sink.
Is Microsoft a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 35 Buys assigned in the past three months, as indicated by the graphic below. After a 65.44% rally in its share price over the past year, the average MSFT price target of $436.45 per share implies 7.43% upside potential.
