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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 MrBlastman on 5/10/2011 11:29:48 AM , Rating: 2
There is a big rule in investing--avoid buy a company that is losing money. If you do, you'll have to do a whole lot more work to even begin recouping the investment.

All Microsoft here has done is dole out some money for another company. The burden is now on their shoulders to prove to us it was worthwhile. 8.5 billion dollars worthwhile.

I think they can do it--if they're visionary about it.

I can think of a few things they could use it for:

- Think the movie "Aliens" in online gaming where you have all your squadmates along the edge of the screen in video windows so you can see them as you're fragging.

- Video conferencing via Kinect.

- Using Powerpoint over the web similar to WebEx (replace it) and have your face on the screen via a Skype applet that is now built in. The recipients wouldn't even need to own Powerpoint to watch.

- Facial recognition algorithms built into the OS that are then confirmed remotely via the cloud to verify identity before Windows 8 will let you log into it.

- Skype mobile w/a bluetooth interface to a pair of glasses so you can watch video conferencing discretely and privately while going about your business instead of having to look at your PDA. This would be radical if they did it... only problem is... how do they see you?

I can probably come up with a lot more. Microsoft is going to have to do something to secure a positive cash flow from Skype. As of now, they constantly lose money. They can't just maintain status quo and expect to get anything out of it. I am completely positive also that Microsoft's executives know this.

RE: So...
By Smilin on 5/10/2011 1:57:43 PM , Rating: 1
- Using Powerpoint over the web similar to WebEx (replace it) and have your face on the screen via a Skype applet that is now built in. The recipients wouldn't even need to own Powerpoint to watch.

MS already does this with Livemeeting and Lync.

This brings up the big reason (I think) that MS is doing this: They need a recognized brand name. They already have the tech it's just (as you illustrate) that nobody knows about it.

RE: So...
By MrBlastman on 5/10/2011 2:24:26 PM , Rating: 1
From an IT buddy of mine--according to him, Livemeeting is terrible and no way has ever achieved the smoothness and clarity that Skype provides. But, I have no idea, I've never messed with it.

RE: So...
By Smilin on 5/10/2011 5:48:10 PM , Rating: 1
Depending on what he's doing he may be correct. I myself wouldn't use Livemeeting to simply make a video call. It's a bit heavy for such a simple task.

Livemeeting (the service, not the on-premises) doesn't use high definition video and it is also burning a lot more CPU and bandwidth for whiteboarding, app sharing, participant lists and such. It was a service built before Skype was even a company and is nearing the end of it's support lifecycle.

OCS 2007 R2, the predecessor to Lync began offering HD video before Skype. Lync does it p2p and in conferences of up to 250 with active speaker switching video and multiplexed audio and uses a far more efficient codec.

Office365 will include the newer Lync Online (which you can buy now is still beta).

In the consumer space, Live Messenger is on par with Skype for AV quality. If there are differences in the experience it's more likely an endpoint issue (CPU, Mic used, network jitter, etc).

"I'm an Internet expert too. It's all right to wire the industrial zone only, but there are many problems if other regions of the North are wired." -- North Korean Supreme Commander Kim Jong-il

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