Skype and Microsoft have entered a definitive acquisition agreement for $8.5 billion US. Once the acquisition is signed, Skype will become a new business division of Microsoft. Last week Google and Facebook were said to be in talks with Skype, but surprisingly Microsoft has announced the closed deal today; they’re the ones snapping up the VoIP company. The price of the deal is considerably higher than what eBay bought Skype for back in 2005 ($1.3 B).
What is Microsoft getting out of the deal? According to the official press release in Redmond this morning, “the acquisition will increase the accessibility of real-time video and voice communications, bringing benefits to both consumers and enterprise users and generating significant new business and revenue opportunities. The combination will extend Skype’s world-class brand and the reach of its networked platform, while enhancing Microsoft’s existing portfolio of real-time communications products and services.”
Let’s do the math: The volume of international traffic routed via Skype is significant; in fact the company has become the largest international voice carrier with over 663 millions of registered user as of 2010 and a record of over 30 million simultaneous online users. The international call marketshare was 13% in 2010 and the increasing platform compatibility are a good way for further expansion. Last year Skype generated a revenue of $860 million US and with Microsoft’s implementation the revenue is destined to breach the billion dollar wall shortly.
Despite unobjectionable economic reasons and profitability, what made Microsoft purchase the company before Facebook, Google or even Apple?
More and more customers are switching to non-MS operating systems: Mac OS, iOS, Android etc. Even the next-generation, cloud-based OS, Chrome OS represents a major threat to the company’s business scope. Innovation is not Microsoft’s main strength. They rely on business customers, since for now companies all over the world find it expensive and irrelevant to move to a new platform. MS has failed to enter the music industry with its Zune MP3 player and Windows Mobile OS is not a hit – yet.
This is exactly what they are working on. Imagine a unified system – a perfect symbiosis of desktop computers and mobile phones. Cloud computing is indeed the keyword here, but the company lacks innovative ideas. Everyone knows Skype; it’s a good way for Microsoft to enrich its products and introduce new features. The Nokia-Microsoft deal is also a significant factor for the mobile platform fight against Google and Apple.
It’s convenient to purchase start-up corporations that have exceptional ideas at a low price, but implementing new und yet unknown features is always hard. Microsoft has not been able to stack up against Apple’s constant milestone-setting-strategy in the past years, but as half a billion of people actively use Skype, Ballmer and his team in Redmond have one last chance to avoid a not too unrealistic Cupertino-Mountainview duopolistic leadership.
There is a problem, though: Skype’s success was platform compatibility and cooperation with hundreds of companies (e.g LG’s SkypePhones). Many users fear that Microsoft is going to abandon their platform. There is not even an iPad version of Skype yet, why would Microsoft even care? They could stop working on iOS, Mac, Android and other platforms and concentrate on their own ones. Well, at least OFFICIALLY, they are willing to maintain Skype’s philosophy for a while and at the same time boost their product line thanks to this new acquisition.
Ballmer states that “Skype will support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices, and Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities. Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms.”
Not only the iPad is cannibalizing netbooks, ebooks, gaming consoles and even the low-end-notebook range (basically everything Microsoft focusses on). As a proud iOS and Mac user, I am sceptical. Microsoft has indirectly challenged Apple to monetize FaceTime and I am pretty sure that Steve Jobs is going to take advantage of this situation and try – once again – to bulldoze existing paths and build big roads.
Is Microsoft finally stepping back into the game, or will Apple, Google & co. make the high-score?
Only time can tell.
