Microsoft Corp. agreed to buy the company behind the hit videogame “Minecraft” for $2.5 billion, in an unlikely deal between an antiestablishment Swedish programmer and a tech giant seeking to focus on its strength in business software.
The deal for Mojang AB will give Microsoft an asset with a loyal and largely young following. But it is also a surprising acquisition for Satya Nadella, who took over in February as Microsoft’s chief executive. He has said the company needs to double down on what the company does best—selling software to companies.
The acquisition, expected to close late this year, also means a hefty windfall for Markus Persson, the 35-year-old Swede who created “Minecraft” and has became a cult hero in the independent game community in part for his willingness to bash big companies, including at times Microsoft. Mojang, which has earned more than $100 million in profit from selling “Minecraft” and related merchandise, only has about 40 employees, and Mr. Persson and two other executives are the only shareholders and board members.
Microsoft said the Mojang team will join Microsoft Studios. Mojang Chief Executive Carl Manneh, meanwhile, said the company’s founders are moving on “to start new projects.”
“Minecraft,” introduced in 2009, has sold more than 50 million copies for PCs, smartphones and videogame consoles like Microsoft’s Xbox. The game has drawn in middle-school children and veteran videogame fans eager for the chance to build sprawling worlds from Lego-like digital blocks. The brand also has licensing deals with Scholastic Corp. for handbooks, Lego A/S for toys and Warner Bros. for a coming feature film.
The quick rise of “Minecraft” from a cult game to the target of one of the world’s largest corporations shows how new forms of entertainment, especially on smartphones or other emerging computing devices, are shaking up the media and technology industries. Companies that didn’t exist a few years ago, including Mojang, virtual-reality headset maker Oculus Rift and mobile-messaging service WhatsApp Inc., have been sold for multibillion-dollar prices in recent months.
While Microsoft’s Xbox business has been a secondary focus for Mr. Nadella, he has emphasized how games are among the most popular activities on computers and smartphones. Microsoft’s ownership of “Minecraft” could give people extra incentive to latch on to its Xbox videogame consoles, PCs and phones.
Mojang is particularly important for Microsoft’s struggling smartphone business. “Minecraft” is among the most popular mobile apps, but the company hasn’t made a version for Microsoft’s Windows Phone system, which powers fewer than three out of every 100 new smartphones sold world-wide.
“We don’t view this acquisition as a signal of [Microsoft's] intent to double down on Xbox but consider it an attempt to better address mobile on a cross-platform basis, given that 40% of Minecraft’s units are on mobile platforms,” Nomura analyst Rick Sherlund said in a research note last week.
Mr. Sherlund also said Microsoft could make unique or exclusive “Minecraft” content only for the company’s properties like Xbox or Windows Phone.
The “Minecraft” brand’s potential value for Microsoft is far more strategic than financial, where it will scarcely make a dent. Annual revenue from “Minecraft,” which was 2.07 billion Swedish kroner ($290 million) last year, is less than 1% of Microsoft’s fiscal 2014 sales of $86.8 billion.
But the acquisition isn’t much of a financial risk for Microsoft, whose operations generate enough cash in roughly a month to pay for the Mojang purchase. Microsoft said it expects the deal to break even in fiscal year 2015.
There is, however, a risk of alienating investors already dubious about Microsoft’s deal-making strategy.
Many Microsoft stockholders remain annoyed by the company’s $9.5 billion acquisition this spring of Nokia Corp.’s phone-and-tablet business. Mr. Nadella’s predecessor, Steve Ballmer, agreed to the deal, but now it is the new CEO’s job to harness Nokia to help Microsoft play catch-up in smartphones.