RSSMicrosoft snags Skype for a hefty $8.5B
By Joe Wilcox | Published May 10, 2011, 10:08 AM
Today, Microsoft announced a definitive agreement to buy Skype for $8.5 billion. The deal is simply stunning, for the potential brand reach Microsoft will gain, the boost to its real-time communications strategy and the potential for empowering Windows Phone-powered handsets with robust video communications.
The deal is also the kind of payday venture firms dream about. Auction site eBay acquired Skype in September 2005 for $2.6 billion, which at the time seemed like an odd fit -- a square box trying to fit a round hole. Investment group Silver Lake bought Skype in September 2009 for around $2 billion. Microsoft will deliver the big payday. Can you say return on investment?
Skype had many rumored suitors over the last couple weeks, including Google. But the VoIP calling and text and video chat service will go to Microsoft instead. Silver Lake and Microsoft boards already have approved the deal. Regulators must do likewise.
"Skype is a phenomenal service that is loved by millions of people around the world," Microsoft CEO Steve Ballmer says in a statement issued today. "Together we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world."
Microsoft obviously has reasons for acquiring Skype. Early punditry focuses on competition from Apple FaceTime and Google Voices, which is shortsighted. The reasons I see, ahead of the Microsoft-Skype 11 a.m. ET conference call:
1. Skype has huge global brand affinity and reach. Skype claims a total of "170 million connected users and over 207 billion minutes of voice and video conversations in 2010." What's perhaps more important: How the service enables cheap video and telephony globally, and in markets where Windows Live Messenger is popular or needs a boost.
2. Real time communications already is a Microsoft priority, and it's paying off. Revenue from Lync communications products grew 30 percent year over year during Microsoft's fiscal 2011 third quarter, ended March 31. But that's business. What about consumers? Microsoft plans to make Skype available on all its major consumer platforms, and that includes supporting Kinect on Xbox and integrating into Windows Live.
3. Video is important to the Nokia partnership. Because Nokia has such low presence in the United States, many Americans probably aren't aware that front-facing video camera is a standard feature on the manufacturer's handsets. Nokia offered phones with video-calling capabilities long before Apple offered FaceTime on iPhone. Video calling as standard Windows Phone feature makes sense for future Nokia handsets.
4. Skype helps keep the PC relevant. The PC era may be over, but the personal computer isn't going away anytime soon. Video calling/conferencing is one of those applications that benefits from the kind of processing and graphics power PC's possess. Hey, how are you going to video chat with five people on your smartphone's tiny screen, bud?
5. 4G is coming. As carriers roll out faster networks and build out supporting capabilities, mobile video chat will become an even more viable application. Buying Skype now lets Microsoft leapfrog costly and time-consuming development.
I'm pondering two important questions, regarding the deal: Can Microsoft avoid conflict with carriers? Will Microsoft support other platforms? Carrier conflict seems as inevitable as two trains colliding on the same track. Skype lets users bypass carriers' networks to make phone calls and it can tax infrastructure when used for video.
As for the platforms, Microsoft's press release indicates continued support for other platforms. However, Microsoft has made this pledge before regarding other acquisitions, only later to reduce support to its own platforms.
Are you a Skype user? Are you happy about this development? Please answer in comments.
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Score: -2
|If one looks at this as Microsoft grabbing some technology and maybe getting its stock price out of a the doldrums for the time being, one can see benefits. However, from the standpoint of basic long-term fit, I find it hard to see how this merger works. Microsoft is not a communications company and, in at least that sense, the culture and perspectives of the two are fundamentally different. For most of a decade, Microsoft has been stagnating relative to the competition, much like the IBM of the 1980s, and I'm not seeing yet how this move solves that, or will lead to a solution. There's a good book on the general subject, The Innovator's Dilemma, by Clayton Christensen.
Score: -2
|I think we could argue that they are a communications company. Exchange and the unified messaging aspects of it very much qualify. This will probably just help them even more in that area.
Score: 2
|I agree with you . . . If you're interested on this side of the story then I've got an interesting view at http://offclassroom.com/...-microsoft-buys-it.html
Score: 1
|NOOOOOOOOOO! Not M$! Damn it... Facebook, Google, but not the devil! They are going to ruin the good things Skype still has...
Score: -5
|"Facebook, Google, but not the devil!"
Yeah, because Facebook and Google are both angels and only have our best interests at heart.
Score: 5
|At least Google and facebook did not destroy the products they bought. There are multiple buyouts from M$ and they destroyed the products, literally
Score: -5
|@mshulman - They do. Especially Google.
Score: -1
|You gotta read this buddy! http://offclassroom.com/...-microsoft-buys-it.html
Score: 1
|Microsoft is paying far more than Skype is worth. Just wait a few months for Google to flip the big Google Voice switch to enable VOIP with a data connection without a cell connection.
Score: 1
|Although this result was predictable and not bad from the point of Skype future, there are some things that I'm afraid of. Microsoft can quickly end the support of all pre-Vista OS in new releases of Skype and after that phase out the existing Skype version by introducing the new not backward-compatible features or by simple changes in client-server authorisation protocol. Also I doubt that MS will support the competition mobile platforms similarly like WM7, if it will develop for them at all. In worst case, Skype will become the MS-proprietary system only, and many current users will be forced to migrate to one of MS platforms or look for alternative VoP clients...
Score: -1
|I know a lot of people use XP, but it is on it's way out. I could easily see the next version of skype "needing" similar Hardware Accelerated Graphics from Vista/7 that makes IE9 incompatable with XP. I'm not saying I agree with it, but I could easily see it happening. That said, they would be stupid to not continue to make Linux/Mac versions. Though, this is Microsoft we are talking about.
As for making the mobile version WM7 only, I doubt it. Microsoft still makes a messanger IM client and a Bing search client for both iOS and Android. I could easily see skype staying it's own client or being rolled into a new version of Window Live Mobile Messenger Skype Network Client, or WLM² Skynet Client.
Score: 2
|I also hope the Linux and Android version will still be developed (and improved). Skype has neglected the Linux users and I don't think this is going the change now.
Score: -2
|Microsoft supports things far longer than most. I really doubt they'd do something that would make skype incompatible with XP. I could see them having features that might only work on Windows 7 though - that would make far more sense.
As far as other mobile devices - MS made a bing app for iphone? Or was it android? Either way, they clearly see that the need to support existing devices - I hardly see them changing things here either.
Score: 1
|Microsoft has said that it will support non-Microsoft platforms. Hopefully, you'll see be true.
Score: 1
|Considering how extremely easy it is to migrate from XP to Windows 7 it wouldn't be a problem at all if Microsoft suddenly ended XP support in their applications. They should have aggressively began phasing out XP support as soon as Vista SP 1 was available.
Score: 3
|"Microsoft can quickly end the support of all pre-Vista OS in new releases of Skype and after that phase out the existing Skype version by introducing the new not backward-compatible features or by simple changes in client-server authorisation protocol."
Please Microsoft, make all future versions of Skype NOT compatible with XP. It is time to move on.
Score: 1
|Could not agree more. Ask the fools that bought a Power PC Mac Pro in late 2006 how they felt about Snow Lepord...or how they felt about not being able to use it on their 4k desktop computer.
Apple drops support for stuff faster than many others. Funny thing is they have the financial might to support it longer than anyone else.
I guess if you are forced to buy new stuff to stay current it makes it easier to say "it just works"......because its new.
Score: 2
|This is great news for Windows users. Microsoft has to get back to thinking Windows first. I'm a not only a Skype user but a Windows Phone, Tablet and PC user I see nothing wrong in this deal.
For the first time in a long time Joe, I agree with your points. The Skype brand is still strong. I look forward to skype being baked into the people hub on my Windows Phone.
Score: 5
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