Microsoft CEO Nadella's First Blockbuster Deal May Be $2B Minecraft Maker Acquisition

Microsoft CEO Satya Nadella's first big blockbuster deal may be a $2 billion acquisition of Minecraft maker Mojang, according to a report from The Wall Street Journal.

The deal would be a big boost for Microsoft's computing and gaming hardware unit, which oversees Microsoft's Xbox product. Minecraft, which runs on multiple Microsoft gaming platforms including Xbox 360 and Xbox One, is a $100 million business with more than 100 million registered users.

What's more, the gaming space is one of Microsoft's fastest-growing businesses. The unit's sales soared 50 percent to $9.62 billion in the fiscal year 2014 ended June 30, up from $6.4 billion in the year-ago quarter.

[Related: Cisco's Chambers: Nadella Will Be Successful At Changing Microsoft]

Microsoft sold 1.1 million Xbox consoles in the fourth quarter compared with 1.0 million in the year-ago period. Xbox platform sales in the fourth quarter were up 14 percent to $104 million, driven by increased Xbox console revenue.

Warwick Business School Professor of Practice Mark Skilton, who has analyzed IT industry shifts for more than 30 years, called the potential deal a "reflection of the 'platforming' strategy that Nadella is pursuing aggressively to drive concurrent users delivering recurring revenue across multiple communities from gaming to business."

"In the enterprise, it is all about the size of the community, community concurrency, and connecting communities together," said Skilton, whose book "Building The Digital Enterprise" is expected to be available next year. "It is now all about the user and customer experience. What Microsoft partners need to do is enable added-value user experiences on top of those communities. It is not doom and gloom and the end of the world for Microsoft partners. It is all about providing added-value experiences."

Skilton pointed to Microsoft's cloud and mobile platforms as segments partners can leverage to drive unique user experiences. "Microsoft's software licensing model is dying," he said. "We are in a subscription and information-sharing economy. It is a different world."

Next: Connected Communities Are Fetching High Price Tags

As evidence of the value of connected communities, Skilton pointed to the high price tags that connected communities are fetching in blockbuster deals. Amazon, for example, recently purchased Twitch, a community that has attracted more than a million users displaying their video-game-playing prowess, for $970 million. Twitch, whose peak Internet traffic surpasses Facebook and Amazon, did not exist four years ago.

Skilton predicted that over the next several years Microsoft would begin to integrate different communities such as Minecraft, leveraging the community to adopt other Microsoft platforms. "It is all about driving up the number of concurrent users for Microsoft," he said. "Two billion dollars is not a small bet by anyone's measure. Nadella sees it as a good and safe strategy to leverage that community in mobile and cloud. This is about Microsoft getting into Generation Z thinking. It is all about community and everything being online and connected."

Michael Goldstein, president and CEO of LANInfotech, a Microsoft partner based in Fort Lauderdale, Fla., said he sees the potential deal as another sign of Microsoft's push to drive a "consistent user experience from the consumer all the way to the high-end desktop."

"It's kind of surprising to see them possibly spending that kind of money on a gaming company," he said. "It is interesting given that Windows 9 is being pushed out the door by Microsoft. Obviously, user interface is driving platform decisions across all companies, not just Microsoft. Everybody is rushing to drive user experiences."

Goldstein pointed to the Apple event this week where the company launched its iPhone 6, iPhone 6 Plus, Apple Watch and Apple Pay mobile payment system as the ultimate user experience product announcement. "The Apple event, which featured U2, was all about user experience, not just the product," he said.

PUBLISHED SEPT. 10, 2014