The UK — which blocked the Microsoft-Activison deal — is ready to negotiate. Here’s what happens next
Britain’s competition regulator, the staunchest opponent of Microsoft’s $69 billion acquisition of gaming giant Activision Blizzard, flat out blocked the deal in April.
It appears the U.K. Competitions and Markets Authority may have now had a change of heart.
After a U.S. judge on Tuesday denied the the Federal Trade Commission’s motion for a preliminary injunction to stop Microsoft from completing its purchase of Activision Blizzard, the U.K. CMA said it was ready to go back to the negotiations table with the Redmond giant.
But what assurances can Microsoft offer to the CMA, after previous attempts at concessions have failed?
Why the CMA blocked the Microsoft-Activision deal
The U.K. CMA efficiently blocked the acquisition in April, saying the deal raises competition concerns in the nascent cloud gaming market. Like other regulators, the CMA is concerned that Microsoft could take Activision games and make them exclusive to its own platforms.
Cloud gaming is a technology that enables gamers to access games via remote servers — effectively streaming a game like you would a movie on Netflix. The technology is still in its infancy, but Microsoft is betting big on it becoming a mainstream way of playing games.
“Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities,” the CMA said in April.
Why did it change course?
The CMA had been aggressively pushing for Microsoft not to purchase Activision — and its decision to relax its stance has come as a surprise to many.
In its statement, the CMA suggested it would open up negotiations with Microsoft to consider proposals to resolve the dispute.
An Activision Blizzard’s Call of Duty: Modern Warfare video game is inserted into the Microsoft’s Xbox One video game console arranged in Denver, Colorado, on Wednesday, Jan. 19, 2022.
Michael Ciaglo | Bloomberg | Getty Images
“We stand ready to consider any proposals from Microsoft to restructure the transaction in a way that would address the concerns set out in our Final Report,” a CMA spokesperson told CNBC via email on Tuesday.
“In order to be able to prioritise work on these proposals, Microsoft and Activision have agreed with the CMA that a stay of litigation in the UK would be in the public interest and all parties have made a joint submission to the Competition Appeal Tribunal to this effect.”
The regulator could have gone ahead and progressed with legal action in the courts. However, this would have been a lengthy and costly process, and may have been particularly bruising for the watchdog, if it were to lose the case.
Alex Haffner, a competition lawyer at law firm Fladgate, told CNBC that the setback to the FTC essentially left the CMA “exposed to being the only regulator that has actually blocked the deal.”
“Why did they do this? You might call it face saving, you might also call it pragmatic, given the circumstances,” he said.
“It’s been backed into a corner and publicly said it’s announced a stay of the appeal to negotiate with Microsoft,” Haffner added. “You add that, together with the political machinations of all of the heat the CMA’s got. It’s pretty nailed on [that] it’s going to negotiate some kind of settlement with the parties.”
What happens next?
The CMA, Microsoft and Activision now look set to hash out a possible resolution to the regulator’s concerns to get a deal over the line.
Microsoft could seek to provide further commitments to the regulator. It’s not yet clear at this stage what those pledges could look like, but Haffner said they would need to be “proportionate to the concerns raised.”
“There will be an intense period of negotiations on both sides they need to get it done quickly,” Haffner told CNBC. “We’ll get it done in a week or so, I’d say.”
Microsoft has a July 18 deadline to complete the deal.
Microsoft has already offered concessions to the U.K. regulator which were rejected.
One of the remedies involves Microsoft making certain games available on other platforms for a defined period of time. For example, Microsoft said in February that it would bring Xbox PC games to Nvidia’s cloud gaming service. The company also signed a 10-year deal with rival Nintendo to bring Call of Duty to the Japanese firm’s platforms the same day as the game would become available on the Xbox.
To the European Union regulators which approved the deal in May, Microsoft said it would offer royalty-free licenses to cloud gaming platforms to stream Activision games, if a consumer has purchased them.
But the CMA has rejected similar concessions on the basis that they would be difficult to monitor and enforce, and the rapidly-fluctuating nature of the nascent cloud gaming sector means such as a remedy may not take into account changes in the cloud market.
So Microsoft will need to take another try at a licensing concession.
Will Microsoft have to divest some business?
Prior to softening its stance in its April ruling, the CMA in February gave a notice of possible solutions to Microsoft. One of those was for Microsoft to sell its business associated with the popular Call of Duty game. Other remedies included a divestiture of some of the Activision Blizzard business.
Microsoft President Brad Smith told CNBC in February that he didn’t see a “feasible path” to sell off Call of Duty.
But a divestiture of some sort could be on the cards, according to Dan Ives, analyst at Wedbush Securities. Ives said in a note on Wednesday that Microsoft could carve out its Game Pass subscription service in the U.K. to satisfy the CMA.
Game Pass is Microsoft’s subscription service on the Xbox console and PC, which gives users access to hundreds of games.
The X logo appears on a phone, and the xAI logo is displayed on a laptop in Krakow, Poland, on April 1, 2025. (Photo by Klaudia Radecka/NurPhoto via Getty Images)
Nurphoto | Nurphoto | Getty Images
Elon Musk‘s xAI Holdings is in discussions with investors to raise about $20 billion, Bloomberg News reported Friday, citing people familiar with the matter.
The funding would value the company at over $120 billion, according to the report.
Musk was looking to assign “proper value” to xAI, sources told CNBC’s David Faber earlier this month. The remarks were made during a call with xAI investors, sources familiar with the matter told Faber. The Tesla CEO at that time didn’t explicitly mention any upcoming funding round, but the sources suggested xAI was preparing for a substantial capital raise in the near future.
The funding amount could be more than $20 billion as the exact figure had not been decided, the Bloomberg report added.
Artificial intelligence startup xAI didn’t immediately respond to a CNBC request for comment outside of U.S. business hours.
The AI firm last month acquired X in an all-stock deal that valued xAI at $80 billion and the social media platform at $33 billion.
“xAI and X’s futures are intertwined. Today, we officially take the step to combine the data, models, compute, distribution and talent,” Musk said on X, announcing the deal. “This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach.”
Read the full Bloomberg story here.
— CNBC’s Samantha Subin contributed to this report.
Alphabet CEO Sundar Pichai during the Google I/O developers conference in Mountain View, California, on May 10, 2023.
David Paul Morris | Bloomberg | Getty Images
Alphabet‘s stock gained 3% Friday after signaling strong growth in its search and advertising businesses amid a competitive artificial intelligence environment and uncertain macro backdrop.
“GOOGL‘s pace of GenAI product roll-out is accelerating with multiple encouraging signals,” wrote Morgan Stanley‘s Brian Nowak. “Macro uncertainty still exists but we remain [overweight] given GOOGL’s still strong relative position and improving pace of GenAI enabled product roll-out.”
The search giant posted earnings of $2.81 per share on $90.23 billion in revenues. That topped the $89.12 billion in sales and $2.01 in EPS expected by LSEG analysts. Revenues grew 12% year-over-year and ahead of the 10% anticipated by Wall Street.
Net income rose 46% to $34.54 billion, or $2.81 per share. That’s up from $23.66 billion, or $1.89 per share, in the year-ago period. Alphabet said the figure included $8 billion in unrealized gains on its nonmarketable equity securities connected to its investment in a private company.
Adjusted earnings, excluding that gain, were $2.27 per share, according to LSEG, and topped analyst expectations.
Alphabet shares have pulled back about 16% this year as it battles volatility spurred by mounting trade war fears and worries that President Donald Trump‘s tariffs could crush the global economy. That would make it more difficult for Alphabet to potentially acquire infrastructure for data centers powering AI models as it faces off against competitors such as OpenAI and Anthropic to develop largely language models.
During Thursday’s call with investors, Alphabet suggested that it’s too soon to tally the total impact of tariffs. However, Google’s business chief Philipp Schindler said that ending the de minimis trade exemption in May, which created a loophole benefitting many Chinese e-commerce retailers, could create a “slight headwind” for the company’s ads business, specifically in the Asia-Pacific region. The loophole allows shipments under $800 to come into the U.S. duty-free.
Despite this backdrop, Alphabet showed steady growth in its advertising and search business, reporting $66.89 billion in revenues for its advertising unit. That reflected 8.5% growth from the year-ago period. The company reported $8.93 billion in advertising revenue for its YouTube business, shy of an $8.97 billion estimate from StreetAccount.
Alphabet’s “Search and other” unit rose 9.8% to $50.7 billion, up from $46.16 billion last year. The company said that its AI Overviews tool used in its Google search results page has accumulated 1.5 billion monthly users from a billion in October.
Bank of America analyst Justin Post said that Wall Street is underestimating the upside potential and “monetization ramp” from this tool and cloud demand fueled by AI.
“The strong 1Q search performance, along with constructive comments on Gemini [large language model] performance and [AI Overviews] adoption could help alleviate some investor concerns on AI competition,” Post wrote in a note.
WATCH: Gemini delivering well for Google, says Check Capital’s Chris Ballard
CNBC’s Jennifer Elias contributed to this report.
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