The biggest single acquisition in Microsoft history is now, (wait for it), Internet history as Microsoft announced it has acquired the Internet telephone service that has become a noun and a verb— and is pronounced “Skype”— for the purchase price of a mere $8.5 billon dollars!
The local reaction, as gauged in an online Twitter forum arranged by The SeattleTimes was, shall we say, skeptical.
“Strategically makes sense, not sure about the price tag,” said Sid Parakh, an analyst at McAdams Wright Ragen.
The Skype franchise can count 170M connected users, 40% growth YOY, and a thoroughly convincing 600K new registrations every day.
And while Skype has become virtually synonymous with Internet voice dialing, more than 40% of the service is used for video.
The Time’s Sharon Chan notes from her own research that “Skype lost $7M in 2010. Only 8.8M users per month are paying customers out of the 145M connected users they had at the end of December.”
CEO Ballmer talked a lot about Xbox Live and Windows Live messenger in the announcement. The main idea behind Ballmer’s comments was that Skype would bridge home office and mobile. But Chan echoes the public sentiment: “It’s all about the execution — how well they bring the two companies together. Microsoft has had several acquisitions that were never well integrated.”
Case in point: Danger. The company that made the Sidekick. That produced the Kin, the social networking mobile phone that was killed 2 months after it launched last year. Another case in point: aQuantive. Microsoft paid $6B for it. Hard to say how much money they made. But they sold Razorfish, the biggest chunk of aQuantive for far less than $6B a couple years later.
Critics aside, what Microsoft has “acquired” is immediate relevancy, if not parity, to counterparts like Apple’s Facetime video chat and, in the mainstream, to Internet socialization at large. Skype also has a couple of partnerships with Blue-ray players and TV makers like Panasonic, and that would include those.
A big bonus is that Skype brings along Qik, a streaming video service. Your Xbox gaming and Bing searching may never be more collaborative.
Two phrases were chosen by Microsoft leadership to define the event: “Super ambitous,” and “Irrepressible.”
Microsoft will need to get regulatory approval but expects the deal to close by the end of 2012.
Ballmer hopes to one day attend parent teacher conferences at Lakeside, the private school one of his sons attends, via Skype. “I broke my back trying sitting in traffic to get to a meeting at my kid’s school,” he said. “I got there and wondered why I couldn’t participate electronically.” [24×7]
