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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 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.


"What would I do? I'd shut it down and give the money back to the shareholders." -- Michael Dell, after being asked what to do with Apple Computer in 1997











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