NPI's Cascadia Advocate

Offering commentary and analysis from Washington, Oregon, and Idaho, The Cascadia Advocate is the Northwest Progressive Institute's unconventional perspective on world, national, and local politics.

Tuesday, May 10th, 2011

Microsoft buys Skype for $8.5 billion

Microsoft con­firmed today that it is spend­ing eight and half bil­lion dol­lars in cash to acquire peer to peer com­mu­ni­ca­tions com­pa­ny Skype, which oper­ates the world’s most pre­em­i­nent VOIP (voice over Inter­net pro­to­col) platform.

The deal, which was first report­ed by the tech press a cou­ple of days ago, is the biggest acqui­si­tion in Microsoft­’s his­to­ry, super­sed­ing its pur­chase of aQuan­tive in 2007.

It also marks the begin­ning of a new chap­ter for Lux­em­bourg-based Skype, which start­ed out in 2003 as its own com­pa­ny, became part of eBay in 2005, and then was spun out of eBay in 2009 with the help of a con­sor­tium of ven­ture cap­i­tal firms, which now stand to prof­it hand­i­ly from the sale to Microsoft.

eBay bought Skype six years ago for an esti­mat­ed $3.1 bil­lion; the com­pa­ny lat­er admit­ted that it had over­paid. Skype was val­ued at $2.75 bil­lion in Novem­ber 2009 when eBay sold most of it to a con­sor­tium led by Sil­ver Lake. Microsoft is now buy­ing Skype for more than twice that sum a year and a half later.

No won­der, then, that many tech pun­dits say Microsoft is overpaying.

Microsoft obvi­ous­ly decid­ed that it did­n’t just want Skype, it need­ed Skype, and, con­se­quent­ly, it would be bet­ter to put up the mon­ey to buy it now instead of wait­ing. CEO Steve Ballmer con­tend­ed that Skype was on the path to an IPO (ini­tial pub­lic offer­ing), and that’s like­ly true. So the acqui­si­tion makes sense in that context.

It is, after all, eas­i­er for a pub­licly-owned cor­po­ra­tion to buy a pri­vate­ly-owned com­pa­ny than anoth­er pub­licly-owned corporation.

Microsoft mem­o­rably tried to buy Yahoo a few years ago. That offer was rebuffed, and Microsoft and Yahoo even­tu­al­ly forged a search and adver­tis­ing part­ner­ship instead.

There’s been spec­u­la­tion that Skype will be no longer sup­port­ed on plat­forms oth­er than Win­dows and Win­dows Phone, but Microsoft says that’s not the case. The com­pa­ny explic­it­ly said in its news release con­firm­ing the acqui­si­tion that it “will con­tin­ue to invest in and sup­port Skype clients on non-Microsoft platforms.”

That sug­gests the Skype client for Mac OS and GNU/Linux dis­tri­b­u­tions will con­tin­ue to be devel­oped and be avail­able for down­load in the years to come. And it makes sense: Microsoft would be fool­ish to not make Skype avail­able for oth­er platforms.

How­ev­er, that com­mit­ment won’t pre­vent Microsoft from inte­grat­ing Skype more tight­ly into its own prod­ucts. And indeed, the com­pa­ny says we can soon expect to see Skype woven into Hot­mail, Out­look, Live Mes­sen­ger, Xbox and Kinect, as well as Win­dows Phone (which has qui­et­ly assim­i­lat­ed Zune).

Face­book and Google were also said to be inter­est­ed in Skype, though Face­book’s inter­est was report­ed­ly not seri­ous. Microsoft is actu­al­ly an investor in Face­book, and Face­book uti­lizes Bing for web search, so the social net­work­ing giant does­n’t have much to wor­ry about. Microsoft rivals Apple and Google are prob­a­bly much more con­cerned about Skype becom­ing a Microsoft subsidiary.

The deal has already been approved by the boards of direc­tors of both com­pa­nies. It is sub­ject to reg­u­la­to­ry approval, but that’s like­ly just a formality.

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  1. I think Microsoft pay more and Skype call­ing charges will be increased.

    # by Limos :: May 10th, 2011 at 11:25 PM
  2. Skype’s a *huge* band­width pig. If MS deploys it wide­ly, what a mess that will be!

    See, for instance:

    # by The Raven :: May 10th, 2011 at 11:48 PM

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