It’s the biggest acquisition in Microsoft’s history, and potentially one of its biggest gambles as well. Why did Microsoft buy Skype? What will it do with the service? What does it see in money-losing Skype that makes it worth $8.5bn? CBR rounds up some online reaction to the news.
The move is a ‘masterstroke’, according to Forrester’s Mike Gualtieri: "Microsoft failed miserably at mobile. While the boys and girls in Redmond were contemplating how to put the "Start" menu on a phone, Steve Jobs was cleaning mobile clocks with the iPhone. But, like all great competitors, Microsoft knew they lost it. So they started from scratch. The result: Windows Phone 7."
What has this got to do with Skype? Well, despite labelling Windows Phone 7 an ‘awesome’ platform, Gualtieri acknowledges that it lacks the cultural cachet. "The problem: The momentum favours iPhone and Android. Microsoft needs an ace card. Ballmer, potentially, found an ace card in Skype," he adds.
"Skype is not a phone. It’s a way to see your three-year-old granddaughter, connect with your adult children, or make sure your family is safe 4,000 miles away. And, it’s mostly free. What is important is that many of these users would love to make free calls on a mobile phone. Microsoft’s plan to acquire Skype fits in perfectly with its recent partnership with Nokia because both offer incredible reach."
Writing on the Financial Times blog, Maija Palmer described the deal as ‘punchy’: "An adjusted-EBITDA multiple of 32 times for a loss-making company that eBay failed to make work at less than half the price six years ago."
"But six years is a long time on the internet and with Google and Facebook also reportedly sniffing around, the strategic value to Microsoft could – if it pulls off the integration challenge – make the deal look almost reasonable. For Microsoft more than either of its counter-bidders, Skype could form the glue between its PC, mobile and gaming businesses that it has hitherto lacked," Palmer added.
Palmer agreed with Gualtieri that the potential for Skype services on Microsoft mobile devices could turn this deal into a winner. But how would Microsoft make money out of the deal. After all, Skype was a loss-making business: "Skype’s commercial problem has been that only 8.1m pay for any extra services, on average. That’s just 6.5 per cent of its active user base, a relatively low number for a "freemium" business. Microsoft’s Office product set – which is even more embedded in the world’s PCs – could change the commercial aspect of that."
Om Malik, writing on his GigaOm site, said while it’s perfectly possible that Microsoft will botch this deal – "as it often does when it buys a company" – there are a number of reasons why it could work.
"Skype gives Microsoft a boost in the enterprise collaboration market, thanks to Skype’s voice, video and sharing capabilities, especially when competing with Cisco and Google," Malik wrote. "It gives Microsoft a working relationship with carriers, many of them looking to partner with Skype as they start to transition to LTE-based networks. It would give them a must-have application/service that can help with the adoption of the future versions of Windows Mobile operating system."
He concluded by added to the chorus of voices saying Microsoft’s mobile offering would be the big winner.
Richard Ellis, director at IT Services provider 2e2 reckons the deal bodes well for businesses: "While Microsoft’s acquisition of Skype is being seen by many as a consumer play it also stands to have many interesting connotations for business users, especially regarding how it could tie in with Microsoft’s future Unified Communications offerings, such as its Microsoft Lync Server."
"Many organisations, despite having Microsoft on the desktop, currently use Skype as their messaging/VoIP client so looking ahead I can envisage much tighter integration with desktop applications such as Office. On the flip side, those organisations that have been reticent to allow employee usage of Skype due to security concerns may now start to reconsider their stance once it comes under the Microsoft banner," Ellis added.
Integration with Microsoft’s core business package was another reason this deal could prove to be a success, while increasing competition between Redmond and Cisco and Alcatel-Lucent, according to Fred Huet, managing director of Greenwich Consulting.
"This is a bold move by Microsoft and may be a good idea if there is a strategic plan behind it. It is exciting to think about potential technology integration between Microsoft Windows platform and Skype services but this will undoubtedly raise competition concerns and Microsoft will have to see in detail how to integrate this into its mobile offering and the its deal with Nokia," Huet added.
