Microsoft spent nearly half of its cash chest to buy Activision Blizzard, expanding its presence in interactive entertainment content and services. The deal tops the 2016 Dell-EMC merger by about $2 billion.

Corporations can spend their cash in different ways to enhance shareholder value, like share buybacks, which reduce the number of shares in circulation. That helps boost EPS and eventually equity prices. It's a popular strategy for investors who look for capital appreciation.

Then there are dividend hikes, which provide shareholders with some income while waiting for the shares to appreciate. It's a popular strategy for investors looking for both income and capital appreciation.

And there’s also investment in future growth by spending the cash either internally or externally by buying up other companies. It's a popular strategy for momentum investors, who focus on future sales growth rather than current earnings and capital distributions.

Microsoft has been pursuing all these strategies in managing its cash to deliver superior returns to its shareholders. And it has been doing a great job, as evidenced by the stellar performance of its chares in the four decades that it has been a publicly traded company.

Still, the Activision Blizzard deal raises the critical question for every company that spends a massive amount of cash in an acquisition. Is the money well spent?

"Microsoft acquires some of the most popular titles in the gaming industry as well as the IP," said Jeff Sue, general manager of the Americas for Mintegral. "These are proven franchises [with passionate, engaged audiences] which will play a key role heading into the metaverse."

Sue added that the Activision Blizzard deal will add to Microsoft's growth.

"With the acquisition, Microsoft has essentially leapfrogged into third place in global gaming revenue, behind only Tencent and Sony," he said. "They also pick up a very successful mobile gaming presence, which they did not have before, and which will only continue to grow."

Sue sees several synergies between the two companies.

"Beyond the immediate synergies, like Game Pass, and combining of console and mobile, it will be interesting how the ads business develops. With the recent acquisition of Xandr (CTV), with LinkedIn data, and now a larger audience of gamers across many devices, how aggressively will they expand their ads business? Further down the line, Activision Blizzard has some amazing IP which would do very well for NFTs and onboarding users to experiences in the metaverse," Sue said.

Adam Mansfield, a Microsoft practice leader at UpperEdge, said he isn't that sure as to whether Microsoft's cash is best spent in acquisitions outside its core businesses. And it may upset the company’s enterprise customers.

"Many enterprise customers who spend millions of dollars with Microsoft on Microsoft 365, Power Platform, Azure, etc., will likely pay even closer attention to whether or not they feel they're getting the expected value from these products," said Mansfield. "They will look closer at whether Microsoft is spending their money on solutions that benefit them."

That raises the "innovator's dilemma." Should a company invest in its core businesses, promoting current growth, or venture into new enterprises promoting future growth?

Will the deal go through?

Sue thinks so since the sector has plenty of competition.

"The gaming space is very large and covers many different areas, console, PC, mobile, etc., and within those, there are many different models, premium, free to play, subscription, etc.," Sue said. "It's yet to be seen if Microsoft will favor their newly acquired IP over other games or remove famous IP, like Call of Duty, from competitive platforms, like Sony. Those would have additional ramifications and concerns for antitrust."

Wall Street will be closely watching.

Panos Mourdoukoutas owns shares of Microsoft.