ETFs To Gain As Microsoft Bets Big On Video Gaming

Gaming has been the hottest corner in the entertainment industry. As stay-at-home trends lead to higher demand for gaming amid the COVID-19 pandemic, most technology companies are jumping on the space or bolstering their position to gain market share. As such, mergers and acquisitions are not a surprise deal in the gaming space.

The world's largest software maker Microsoft (MSFT - Free Report) plans to acquire ZeniMax Media Inc., owner of the storied video-game publisher Bethesda Softworks, for $7.5 billion in cash. This would represent its biggest video game purchase ever.

The proposed deal will bolster Microsoft’s Xbox original games portfolio with a number of the industry’s highest-profile titles including Elder Scrolls, Doom, Fallout, Qyuake, Wolfenstein, Dishonored, Prey and Starfield. It will bring high profile publishers, including Bethesda Game Studios, id Software, ZeniMax Online Studios, Arkane, MachineGames, Tango Gameworks, Alpha Dog and Roundhouse Studios, under the Microsoft gaming roof.

With the additions, Microsoft’s portfolio will expand from 15 to 23 creative studio teams. The software maker plans to bring Bethesda's iconic franchises into its monthly Xbox Game Pass subscription service when they launch on Xbox or PC. The Xbox Game Pass now has more than 15 million subscribers.

The deal, which is expected to close in the second half of 2021, will not likely affect its non-GAAP earnings for this year or next. The move comes more than a week after Microsoft's failed bid for short video app TikTok's U.S assets.

ETFs to Gain

The deal announcement is expected to spread some cheer to ETFs with double-digit exposure to Microsoft amid the market turmoil. Below we have highlighted some of them:

Select Sector SPDR Technology ETF (XLK - Free Report)

This most-popular technology ETF follows the Technology Select Sector Index and has $34 billion in AUM. The fund charges 13 bps in fees per year from investors and trades in a heavy volume of around 10.7 million shares a day on average. It holds about 72 securities in its basket, with Microsoft occupying the second position at 20.2%. XLK has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

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