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Microsoft digs into its deep pockets to snatch up Skype

The Wall Street Journal reported earlier tonight that Microsoft was in talks to purchase VoIP company Skype for between $7 billion and $8 billion. Kara Swisher just recently confirmed the acquisition in her BoomTown column, starting that the deal is worth an estimated $8.5 billion. 

Earlier reports stated that Google and Facebook were duking it out to get a piece of Skype, but in the end Steve Ballmer and Microsoft's huge chest of cash put an end to those discussions. The earlier reports also pointed to a Skype valuation of $3 to $4 billion, so Microsoft's $8.5 billion purchase price hopefully will bring a hefty ROI.

For those keeping score, eBay bought Skype in 2005 for $2.5 billion. Four years later, eBay sold a 65% stake in the company for $1.9 billion.

The first beta of Skype was introduced in 2003, and as of December 2010, it had over 663 million registered users. The average number of monthly connected users is much lower, however, at 145 million. And when it comes to users that actually pay for the service, the numbers drop down to just 8.8 million. 

Registered users can make Skype-to-Skype calls and one-to-one video calls for free. Users can make Skype-to-phone calls at a rate of 2.3 cents/minute. Skype also offers subscription plans at a rate of 1.2 cents/minute. 

We'll have to wait a few more hours until we get all the juicy details on Microsoft's latest acquisition, but we're betting that the boys from Redmond plan on tightly integrating Skype with Windows Phone 7 to better compete with Google Voice.

Updated 5/11/2011 @ 8:34am

Well, the news is now official. Microsoft just announced that it is acquiring Skype for $8.5 billion in cash. Microsoft says that Skype will bolster its "existing portfolio of real-time communications products and services."

As expected, Skype will be tightly integrated into the Xbox 360 and Windows Phone 7 platform. Microsoft is also creating a new business division called the Microsoft Skype Division, which will be headed by Skype CEO Tony Bates (he will report directly to Microsoft CEO Steve Ballmer).

“Skype is a phenomenal service that is loved by millions of people around the world,” said Ballmer. “Together we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world.”

“Microsoft and Skype share the vision of bringing software innovation and products to our customers,” said Bates. “Together, we will be able to accelerate Skype's plans to extend our global community and introduce new ways for everyone to communicate and collaborate.”

You can read the full press release here.



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RE: So...
By mcnabney on 5/10/2011 9:19:17 AM , Rating: 0
They are doing a helluva job.... writing checks.

Yo Microsoft, innovating is when you think up an idea, not when you buy someone elses.


RE: So...
By smackababy on 5/10/11, Rating: 0
RE: So...
By Smilin on 5/10/2011 10:29:20 AM , Rating: 5
They aren't "innovating" anything with this. They are buying a name. Why? For people like you.

You must not realize that MS already has a video solution that makes Skype look like a telegraph. When Skype starts doing "magical" stuff in a few years people will think it is something new when it's something MS has already been doing (in Lync 2010, Livemeeting, Messenger, Video Kinect, integration with PSTN, SIP trunks, AOL, MSN, Yahoo, XMPP, etc..).

MS has a crushing image problem right now. Nobody gives them credit when it's due.


RE: So...
By Camikazi on 5/10/2011 10:33:58 AM , Rating: 2
I think that post was a little jab at Apple, the "Magical" company that copies most all they do :P


RE: So...
By Smilin on 5/10/2011 11:58:01 AM , Rating: 2
If you look behind past me, above and slightly to the left, you can just make out the dot of where that flew past me.

:P

Seriously: MS has killer VoIP and Video (just ask Cisco who they've beat to a bloody pulp the last 3 years). Add MS tech and especially integration to Skype and some bajillion users are going to be really happy.


RE: So...
By EricMartello on 5/10/2011 3:56:50 PM , Rating: 1
quote:
You must not realize that MS already has a video solution that makes Skype look like a telegraph. When Skype starts doing "magical" stuff in a few years people will think it is something new when it's something MS has already been doing (in Lync 2010, Livemeeting, Messenger, Video Kinect, integration with PSTN, SIP trunks, AOL, MSN, Yahoo, XMPP, etc..).


What are you talking about? You think rattling off a list of loosely communications programs means MS had something better than Skype? Lync 2010 isn't even comparable to Skype! Livemeeting? Seriously?? No, not even in the same class. The only relevant thing on your list is Messenger, which actually relied on Skype's technology for video calls.

MS buying Skype is a smart business decision because it's giving them access to a large, established user base along with a recognized brand. MS can also make use of Skype's P2P networking technology which is the main differentiation between Skype and just about all other IM clients out there.


RE: So...
By PrezWeezy on 5/10/2011 5:12:31 PM , Rating: 4
You've never actually used Lync or Livemeeting before have you?


RE: So...
By Smilin on 5/10/2011 5:36:45 PM , Rating: 3
quote:
What are you talking about? You think rattling off a list of loosely communications programs means MS had something better than Skype?


No. My point was to illustrate that Microsoft has absolutely no need of the technology used by Skype. There is nothing at all revolutionary about their product.

Skype does not compete in the markets that MS is already in. They simply lack the feature set to do so.

quote:
Lync 2010 isn't even comparable to Skype!

You're right, it's not. Skype is a tinker toy compared to Lync. It lacks the security, the compatibility, the open standards, and the features. Man oh man does it lack the features. Before you get all stompy on your soapbox you might want to go figure out what Lync does.

quote:
The only relevant thing on your list is Messenger, which actually relied on Skype's technology for video calls.

That's interesting since Messenger had video since before Skype was even a company.
quote:
MS can also make use of Skype's P2P networking technology which is the main differentiation between Skype and just about all other IM clients out there.

Please explain more about the P2P **networking technology** (my eyes are rolling). All SIP based VoIP and Video solution out there use peer to peer communication. The server is not required for the simple features that Skype offers. If you want to do anything at all more advanced you'll need a server in the mix. PSTN and SIP trunk providers don't just let random clients come knocking on the door you know.

It cracks me up that you think Skype competes with Lync. I get it: you like Skype and think nothing out there compares. I also get that you know nothing of Lync.

MS is buying a Name and a consumer userbase. They have no need of Skype technology. In fact, Skype is so proprietary that it will be 10x hassle to fix their code to make them interoperate worth a crap.


RE: So...
By seamonkey79 on 5/10/2011 9:35:11 AM , Rating: 2
Why innovate when you an appropriate?


RE: So...
By StanO360 on 5/10/2011 11:18:01 AM , Rating: 2
All corporations do that. So what?


RE: So...
By sviola on 5/10/2011 11:20:37 AM , Rating: 2
Like Google bought Writely (for Google Docs), YouTube and lately the Air Ticket software provider? Or like IBM with Rational, Cognos and others? Or Oracle with Sun? Or Apple with Liquid Metal and that processor design company? Or AMD with ATI? or Nvidia with their recent acquisitions?

In this case, MS is going after the 170 million Skype users (among consumers and businesses).


RE: So...
By callmeroy on 5/10/2011 11:38:23 AM , Rating: 3
Are you honestly that dense about the business world or just trying to be funny?

Its one thing to bust on a company that buys a technology if they talk it up like they created -- then fine have at cracking on them with jokes about lack of innovation, its fair game at that point.

But its naive, at best, to pretend companies don't buy up other companies or products of other companies routinely...that's how business is and has been for longer than anyone reading this forum has been alive. Likewise, it will continue long after anyone reading this forum is dead as well.


RE: So...
By nolisi on 5/10/2011 12:02:11 PM , Rating: 2
Technically, you're right, they aren't innovating. But this is a hell of a business strategy. Here's what the press release isn't saying:

1) Microsoft has just eliminated a competitor.
2) This will (over time) give Microsoft credibility as far as being able to publish application across differing platforms/app markets
3) It gives them the unique ability to make international calls cheaply, bypassing the carrer.
4) Skype is an exciting name in the market place, and having the power to control its direction will give MS the opportunity to tightly integrate it with other products (Microsoft Office/Communications and give Skype the professional credibility it hasn't had.
5) With the existence of Skype on multiple platforms/mobile ecosystems, will allow Microsoft to more tightly integrate various modes of communication on competing platforms (Android, iPhone) into MS's corporate infrastructure- bolstering reasons to use their platform.

I'm sure that's just the beginning.


RE: So...
By Taft12 on 5/10/2011 12:28:15 PM , Rating: 1
quote:
3) It gives them the unique ability to make international calls cheaply, bypassing the carrer.


Only is if the carrier will let them. They will not.

quote:
4) Skype is an exciting name in the market place


It has been for many years now, and hasn't led to profitability. I can't see how that will change despite new ownership and a high pricetag.


RE: So...
By Smilin on 5/10/2011 1:51:59 PM , Rating: 2
quote:
Only is if the carrier will let them. They will not.


I don't think you understand. This is already being done. Microsoft Lync users make international calls free. The carriers have no say in this whatsoever.

quote:
It has been for many years now, and hasn't led to profitability. I can't see how that will change despite new ownership and a high pricetag.


You're thinking small picture here. This isn't about making money with direct revenue off of skype...I mean they offer a free service right? This is about selling Windows phone and selling Ad marketshare (which again is what Windows Phone is about). It's also about integrating with existing properties to boost them (messenger, lync, xbox, wp7, win8, etc)

Between this, the Apple partnership on search, and the yahoo partnership with Bing, Microsoft is getting a large enough Ad marketshare that they are a viable alternative to Google.


RE: So...
By omnicronx on 5/10/2011 12:35:56 PM , Rating: 2
Yo oblivious,

Much of the major technology you use today in smart-phones was acquired by a market giant at one time or another.

The precursor Android itself was bought by Google, also much of the multi-touch patents and technology Apple 'developed' were acquired elsewhere. Need to build ARM chips? Why not just buy a company who develops them.. etc etc..

So many of the products you use today were once based on acquisitions its not even funny.


RE: So...
By jvillaro on 5/10/2011 1:56:21 PM , Rating: 2
So if Google or Facebook were the ones that ended up buying, would have said the same thing about them or are you only a retard when MS is involved?

You have to be very naive to think that MS is the only company out there that buys other companies or their tech. This is business and strategy, if they think they can take advantage of Skype's platform good for them and hopefully good for us.

Apple, Google, Facebook, Oracle, etc etc etc do exactly the same thing all the time so just think a bit before you post... even if it hurts you


"There's no chance that the iPhone is going to get any significant market share. No chance." -- Microsoft CEO Steve Ballmer











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