Microsoft Corp. (MSFT) is reportedly interested in buying the gaming unit of Warner Bros-owned AT&T Inc. (T) to ramp up the game-making capabilites of its Xbox devices.
The Information reported on Monday, citing two people familiar with the matter, that AT&T hasn’t yet decided whether to sell the Interactive Entertainment gaming division that owns popular videogame “Mortal Kombat”.
The interest comes as Microsoft is poised to announce a new lower-tier Xbox to accompany its upcoming console release of the Xbox Series X this fall.
Reported on June 26, by The Verge, a leaked Microsoft document revealed plans for a lesser-powered next-gen Xbox console reportedly called the Xbox Series S. The console would utilize the main aspects of the more powerful Xbox Series X but with plans to sell it at a lower price.
Warner Bros.’ gaming unit is made up of 10 game studios including TT Games, and owns the “Scribblenauts” series. It was snapped up by AT&T as part of the $109 billion Time Warner deal which closed in 2018.
AT&T has been looking into asset sales to cut down on its $154 billion debt pile. Other potential buyers for the gaming unit include Take Two Interactive (TTWO), Electronic Arts (EA) and Activision Blizzard (ATVI). CNBC last month reported that AT&T was considering selling the gaming unit in a deal that could be worth about $4 billion.
Shares in AT&T are currently trading down 22% year-to-date with analysts being cautiously optimistic on the stock. The Moderate Buy consensus shows 8 recent Buy ratings, 5 Holds and 2 Sells. Meanwhile the average analyst price target of $35.14 indicates 15% upside potential from current levels. (See T stock analysis on TipRanks).
“AT&T will continue to slash expenses and is aiming for $6B over the next three years” commented Oppenheimer analyst Timothy Horan. He has a Buy rating and $47 price target on the stock explaining “Importantly, the dividend seems safe and debt reduction can continue with what we and the company estimate to be a 60% payout ratio.”
Related News:
Microsoft To Close All Of Its 83 Retail Stores
Microsoft Plans to Release A Second Lower-Tier Xbox This Fall- Report
AT&T Mulls $4 Billion Sale Of Gaming Division- Report
