Microsoft's Skype Acquisition

Microsoft agreed to buy Internet phone company Technologies for $8.5 billion in cash. That's a lot of money for a firm whose business has yet to become profitable, especially if compared to the $2.6 billion (in cash and stock) that the selling side - Silver Lake et al - paid eBay for 65% of it in 2009, and the $5-$6 billion the owners had sought from other potential suitors including Google, Cisco Systems, and Facebook. The deal is subject to regulatory approval.

Microsoft plans to integrate Skype’s functions to its Xbox and Kinect game consoles, outlook email program, and Windows smartphones but will continue to support it on other software platforms.
  • Product-wise, this could be a nice fit. Microsoft has several areas in both consumer and enterprise sectors that will benefit from a top-notch VoIP, video and sharing solution. All of the synergies may never realize, but even the promise of them goes a long way explaining why the price may not seem that right. Skype may strengthen Microsoft’s Lync, which ties together email, instant messaging, and voice communications into a single offering.
  • Whatever happens, Skype is still multiple times a better fit for Microsoft than it was for eBay, whose own purchase in 2005 was based on the assumption that it would boost its auction business. Who wouldn't enjoy calling to strangers, eh?
  • A preinstalled, well integrated Skype client could be a potent differentiator for Windows Phone devices vs. Androids, iPhone and BlackBerry. Thus far there aren't many, at least in the positive sense of the word.
  • As a third-party app, Skype has worked well on Windows Phone's rivals. So one interesting issue will be to see whether Microsoft will make it exclusive for WP handsets. That would probably unnecessarily hinder Skype's push into the mobile domain, and erode its brand and user base, so a likelier option will be that Nokia and other manufacturers using WP will instead gain some premium features. Video calling might well be one.
  • Telcos won't be happy to see another over-the-top front opening, but they have surely seen it coming. Just witness Telefonica's (Jajah) and Deutsche Telekom's (Bobsled) moves in this space - they're trying hard to make VoIP working for them rather than only against them. But having said that, if they wished that the Nokisoft tie-up would result in a leading yet still operator-friendlier ecosystem they will be disappointed.
Posted on May 10, 2011  Reviews | Share |  Digg
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