Activision Buys Game Developer

Updated from 2:10 p.m. EST

Activision

(ATVI)

announced Thursday that it has acquired game developer Vicarious Visions, the latest in a wave of acquisitions in the video game software sector.

Although Vicarious has developed popular game titles such as

Spider-Man 2

for the Nintendo DS, Activision touted the studio's development technology and tools. Activision plans to use Vicarious' Alchemy middleware to help it develop games for the

next generation of consoles, which are expected to start launching later this year.

The deal, which was completed on Wednesday, involved both stock and cash, Activision spokeswoman Maryanne Lataif said. In a regulatory filing, Activision said that it may issue up to 263,716 shares of stock, worth about $5.6 million, to Vicarious shareholders in connection with the acquisition. Lataif declined to say how much cash the company Vicarious' shareholders.

Development costs are expected to jump for the upcoming iterations of

Sony's

undefined

PlayStation and

Microsoft's

(MSFT)

Xbox. In preparation for those costs, the larger game publishers have been buying up technology and game developers, to bring some of their expenses in-house.

Midway Games

(MWY)

, for instance,

bought three smaller game developers last year. And last July,

Electronic Arts

undefined

acquired Criterion Software Group, which had created a widely used piece of software for game development.

Shares of Activision traded off following the announcement. In recent exchanges, the company's stock was down 29 cents, or 1.3%, to $21.30.