Will Microsoft Ruin Skype?
On May 10, 2011, VoIP pioneer Skype agreed to be purchased by Microsoft for the princely sum of $8.5 billion in cash. Is this good news or a bad omen for users of the popular Internet calling software? Here's my take...
Microsoft Buys Skype: Good News or Bad?
If you're one of Skype's owners, a check for 8.5 billion dollars is a very good thing. The company was poised to launch an IPO in which it hoped to raise $7 billion. But the Microsoft offer enabled private equity firm Silver Lake Group to earn three times its initial investment in Skype - not bad for an investment made only 18 months ago. eBay stands to make about $1.4 billion on its one-third ownership of Skype, in which the auction site invested $2.4 billion in 2005.
Microsoft is delighted with its purchase of Skype, although analysts are generally puzzled as to what, exactly, Microsoft will do with Skype. The software giant was very vague in its announcement of the deal, saying only that it plans to "integrate" Skype into its existing Xbox Kinect, Office productivity suite, online services division, and Windows. Microsoft already has Skype-like video conferencing in its Windows Live Messenger (formerly MSN Messenger) product. In fact, Messenger has nearly twice the user base of Skype, and an even greater dominance among corporate users. So what's in the Skype deal for Microsoft that is worth this much cash?
For one thing, premium Skype users can talk to landline and cell phone users, while Messenger users can only talk to each other. Skype has invested a lot of money in the infrastructure and carrier agreements that make this universal connectivity possible. Skype helps Microsoft catch up to Google Voice in the VoIP market. Aha, catching up to Google... that's been the Microsoft theme song for quite a few years.
The Skype brand is valuable, too. Over 8 million paying users are fiercely loyal to Skype. And let's face it, "Skype me" is a lot easier to say than "Windows Live Messenger me." There are many ways that Microsoft can expand Skype's paid-user base, too.
Potential Benefits of Skype Integration into MS Products
Integrating Skype into Microsoft Outlook will put the VoIP app on the desktops of millions of business users who just might prefer a voice or video call over email in many situations. The Webcam built into the xBox is an ideal complement for Skype. Then there's Lync, Microsoft's unified communications suite. Skype could end up in every Microsoft application from business meetings to distance learning and family get-togethers.
End-users may benefit from greater exposure to VOIP technology and its money-saving convenience. If the merger makes it easier for some users to drop their landlines in favor of internet-based calling, then that will be a plus. Windows Phone, the Microsoft mobile phone operating system, is an obvious place to embed Skype. It might even help reverse the declining market share of Windows Phone. A bigger issue is whether the mobile providers will tolerate VOIP calling on their cellular networks, but that's another discussion.
Microsoft has had difficulty in the past integrating acquisitions within its huge bureaucracy. And some pundits (me included) are worried that Microsoft will ruin Skype, or make it more cumbersome to use. You need only think back to WebTV, Microsoft Bob, the Zune media player and the Kin phone to reinforce these fears. One promising note is that Skype will operate as a separate division within Microsoft, a very unusual move but a smart one.
Whatever roles Skype plays in the Microsoft business strategy, it's important to preserve the Skype brand name and close connection to customers. If they can do that, and not encumber Skype with extra layers of complexity, I think it will be a win-win situation.
What do YOU think about the Microsoft acquisition of Skype? Post your comment or question below...
This article was posted by Bob Rankin on 11 May 2011
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Article information: AskBobRankin -- Will Microsoft Ruin Skype? (Posted: 11 May 2011)
Copyright © 2005 - Bob Rankin - All Rights Reserved