Tuesday, May 10, 2011

Skype Today, MSSkype Tomorrow?

Luxembourg-based Skype and its 663 million global users has been bought by Microsoft for a rumoured $8.5bn. Some would suggest that’s a high ticket for an eight-year-old company and a very high ticket for one that has yet to make substantial money.
eBay bought Skype in 2006 for what was then a lot of money $2.6bn and then sold it in 2009 for just $2bn. So what has changed and why is Microsoft allegedly paying over 4 times what Skype was sold for only two years ago?

Does Microsoft see Skype as a means of getting into the living room and marrying Xbox Kinect and HD television. Are they thinking about home education, remote learning, remote patient home care? Are they buying it to take on the teleconferencing business market? Do they see it as a way back into the mobile world with an alignment Windows Phone 7?

Whichever is the driving motive it’s a lot of investment that will need to deliver real return. Microsoft investors are certainly going to want answers and will ask how an open platform such as Skype is going to deliver exclusive revenues.

Businesses such as ours depend heavily on Skype today to perform global business communication. If Microsoft were to install a toll both and wrench up the payment side, people will just go elsewhere. So the difficulty maybe, will be the integration of Skype into paid services that can then build the revenue.

The big question is whether you need to spend $8.5bn to achieve that?

1 comment:

Aron White said...

The Skype acquisition could be a real boon for Microsoft if they play their cards right. They're behind in interenet/mobile and I'm guessing this is part of a broader strategy including the Windows Phone 7 deal with Nokia to aggressively get into those markets even if it takes a little while to see profit or return on investment.

One of Bill Gate's philosophies I agree with is to never let a competitor get too big in a related market (gaming i.e. Xbox, search i.e. Bing) even if it's not your core one and I think he also realizes now that internet/mobile is the way of the future.

I have to give him/Microsoft some credit for recognizing this (as an example, MS is pushing the Cloud in a big way) and trying to get involved in a big way, even if they are playing catchup.