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Microsoft looks to boost Xbox with bid to buy Minecraft

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ADDICTIVE: The hugely popular game Minecraft is in Microsoft’s sights

ADDICTIVE: The hugely popular game Minecraft is in Microsoft’s sights

ADDICTIVE: The hugely popular game Minecraft is in Microsoft’s sights

Buying Minecraft would help Microsoft Corp Chief Executive Officer Satya Nadella in his drive to get the company's software onto any mobile device - even those made by competitors.

Since becoming CEO in February, Nadella has declared that he wants to have Microsoft programs work across many gadgets, in a break from having the company's software running primarily on hardware that uses its Windows operating system. In March, Nadella said he would "hold nothing back" to achieve that goal.

With Minecraft maker Mojang AB, Nadella would acquire not only a popular game for Microsoft's Xbox video-game business, but also a hot property that works on Apple Inc's iPad, Sony Corp's Playstation and phones based on Google Inc's Android.

Any deal, which would be Nadella's first since taking over Microsoft, would also underline the CEO's commitment to Xbox.

While investors have long debated whether Microsoft should spin off the consumer-oriented business, Nadella said in a company-wide memo in July that he would invest in the unit.

"If there was any thought of Nadella wavering on Xbox, you can throw that out the window," said Daniel Ives, an analyst at FBR Capital Markets & Co. "There is also a broader view on how it fits with his strategy as part of cloud and mobile."

Peter Wootton, a spokesman for Redmond, Washington-based Microsoft, declined to comment.

Nadella didn't seek out what would be his first deal as CEO, people with knowledge of the Mojang discussions have said. The potential purchase fell into Microsoft's lap after a call from Mojang founder Markus "Notch" Persson, said the sources.

The two companies are discussing a deal for more than $2bn which may be concluded as soon as this week, though next week is more likely, said the people.

Microsoft had $85.7bn in cash and short-term investments as of June 30, of which $77.1bn was held overseas and would be subject to "material repatriation tax effects" if brought back to the US, the company said in a filing with the US Securities and Exchange Commission.

Microsoft will use some of that overseas cash to fund the purchase, saving the taxes, a person familiar with the matter said earlier this week.

Xbox has long been the subject of spinoff talk, given that it isn't a core software business. The questions over Xbox's fate were rampant earlier in the year, when Microsoft was picking a new CEO. Nadella dispelled that in July, when he wrote in his memo that while the unit is outside of the company's main business, he still planned to keep it.

Microsoft's sales of computing and gaming hardware, which includes Xbox, rose 23pc from a year earlier to $1.44bn in the three months ended June 30. In total, Microsoft's revenue for the quarter was $23.4bn.

If Microsoft and Stockholm-based Mojang strike an agreement, Microsoft would keep Minecraft available for a range of devices, three people familiar with the company's plans said.

Microsoft calculates it can boost Minecraft sales by increasing the number of game users with its scale and by expanding licensing for items like toys and movies, said one of the people. The company is betting that Minecraft is more like a successful movie franchise at the start of its run, said the person.

With 54 million copies of Minecraft sold in all its forms as of June, the agreement also fits with Nadella's desire to focus on building a passionate following for Microsoft products.

"We want to build products that people love to use,"

Nadella told analysts in his first earnings call in April. "As a result, you'll see us increasingly focus on usage as the leading indicator of long-term success."

Any Mojang deal would in many ways be the mirror opposite of Microsoft's mosoot successful games acquisition, the purchase in 2000 of Bungie Software, the maker of the Halo games. At the time, analysts estimated Microsoft paid $30m to $40m for Buie, before a single game was released. Microsoft turned Halo into a multi-billion-dollar franchise. Bungie split off in 2007 to become an independent company, though Microsoft retains Halo.

Minecraft is already wildly popular worldwide, giving it a far higher price and the danger that Microsoft is buying at the top.

"That's a risk, no doubt," said Ives. "They are buying an expensive asset where once it goes within Microsoft, will it continue to show the type of growth that it has?"

Elsewhere at Xbox, Nadella has trimmed. In July, he ended an ambitious Hollywood effort to create original television content for the video-game console and is closing the studio behind it. Xbox's international sales and marketing teams cut jobs as part of company-wide staff reductions that same month.

The main Xbox effort is now refocused around gamers and gaming after a foray into trying to establish the Xbox One as a broader entertainment device. In terms of time and money, gaming is the biggest "digital life" category in a mobile world, Nadella wrote in July.

"We are fortunate to have Xbox in our family to go after this opportunity with a unique and bold innovation," Nadella wrote. "Microsoft will continue to vigorously innovate and delight gamers with Xbox."

Sunday Indo Business