I was a bit surprised to hear that Microsoft has bought internet phone and video service Skype for $8.5 billion, simply because about a day before the announcement was made, I reported that Facebook and Google is negotiating for a tie-up with Skype, if not acquiring Skype as well.
Then the big bomb was dropped - Microsoft snatch Skype for $8.5 billion in cold cash. Skype will become a new business division within Microsoft, and Skype CEO Tony Bates will assume the title of president of the Microsoft Skype Division.
The initial public reaction was WHY? Why would Microsoft buy Skype considering the company incurred a net loss of $7 million last year on revenue of $860 million, althought its user base grew nearly 40 percent to 145 million. Investors started to question the move, most specially the acquisition cost. $8.5 billion is just too much is what they say as most analyst value Skype at around $4 billion based on the company's 2010 revenue.
Microsoft Chief Executive Officer Steve Ballmer said Skype is a phenomenal service that is loved by millions of people around the world, and together both companies will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world.
One can see at once what Microsoft intends to do with Skype - to support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices, and Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities. The acquisition will automatically put Microsoft in line with Google, Apple and Facebook video chat services.
With social networking getting more and more popular and devices embracing the internet more, Microsoft will really try to put Skype in all Windows powered devices and perhaps will strike deals to incorporate Skype in innovative products like Smart TVs and more. But with this in mind, should Microsoft really need to buy Skype or should Microsoft just strike a licensing deal with Skype and would have achieve the same objective at a much cheaper price.
The common public reaction was Microsoft paid too much to acquire Skype. And being one of the biggest software company, analyst are saying - with the talent and technology Microsoft has under its arsenal, the company could have built their own video chat application rather spending that much.
How can Microsoft make money out of Skype? Microsoft will try to convince corporate users of Skype to subscribe to Skype once Microsoft would be able to integrate Skype into Outlook and other Microsoft business apps. And lastly, Microsoft might put some ads into Skype just to cover Skype's operating expense. But Microsoft should realize that one of the reasons why Skype has been successful is because it has not been plastered with ads. Making Skype an ad-loaded client might drive users away from Skype.
This is my take on this development - Microsoft will definitely incorporate Skype into the future versions of Windows (perhaps starting with Windows 8). Microsoft will incorporate Skype into Windows Phone devices - imagine a Windows powered phone with Skype embedded, that's a cool application. But will users pay for it or will the fees be included with the cost of Windows Phone software? With the popularity of tablets, having Skype in it will be a welcome development. And lastly, Microsoft can enter into various partnership to allow other developers and companies to include Skype into their offerings.
Microsoft and Steve Ballmer must have something up its sleeve that we don't and cannot see as of now that's why they decided to acquire Skype for $8.5 billion. Is it a good or a bad move?
source: mb.com.ph
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