Microsoft's purchase of Skype: One expensive game of keep away

Microsoft's purchase of Skype: One expensive game of keep away

Summary: Microsoft had to buy Skype if only to keep it away from Cisco and Google. Overall, Microsoft probably paid too much.

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Microsoft is about to buy Skype in a deal worth about $8.5 billion and the transaction illustrates how unified communications has finally arrived. The Wall Street Journal is confirming what GigaOm signaled---that Microsoft was going to buy Skype. BoomTown also noted that the deal is done and will be announced shortly. Update: The deal is official.

Here's what you'll hear from Microsoft and Skype execs:

  • Skype will be a big assist to Windows Live and other efforts;
  • Skype's efforts to target the enterprise fit in with Microsoft's strategy;
  • Microsoft won't screw up Skype.

All of those points are true, but the reality is that Microsoft is paying up for Skype because it's an $8.5 billion game of keepaway. And you know what? The deal---and its price tag---makes sense.

Also: Microsoft buys Skype for $8.5 billion; creates new business division

The importance of Skype's unified communications efforts bonked me over the head in an interview with Polycom's Andrew Miller. He noted that it's unclear whether Skype was friend of foe at this point. If Skype really pressed to be an enterprise player, it could be a threat. However, Polycom could also give Cisco a big headache with a Skype partnership.

Enter Microsoft, which already has a fairly successful unified communications effort dubbed Lync. As Mary Jo Foley noted, Lync isn't a household name just yet. Skype is already there.

But to truly understand the Skype purchase you have to walk through the other scenarios.

  • Google was reportedly interested in Skype. Google would take Skype---and its partnerships with Shortel, Avaya and others---and give Apps a bigger footprint.
  • Cisco, Microsoft's main enemy in unified communications, could have bought Skype. In fact, Skype is run by former Cisco execs---notably Skype CEO Tony Bates. However, Cisco is trying to focus right now and Skype would only be a diversion. Microsoft with Skype will be a major Cisco headache.
  • Avaya could have acquired Skype and been a headache to Microsoft.

The only potential acquirer of Skype that wouldn't have been a pain in Microsoft's arse was Facebook.

Given those options it only made sense that Microsoft would pay up for Skype. Skype gives Microsoft some consumer and SMB street cred. So Microsoft probably paid too much. In the end, the deal may be worth it---if only to keep Skype from the competition.

Related:

Topics: Microsoft, Collaboration, Social Enterprise

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  • RE: Microsoft's purchase of Skype: One expensive game of keep away

    I don't agree that Microsoft wouldn't be harmed by a FB Skype acquisition. Microsoft is clinging to stay (be, at all?) relevant in the consumer space, and a FB/Skype messaging solution be a big blow to Windows Live. It also could be a potential blow to enterprise if esp small and medium companies just used FB for messaging instead of paying for Office 365
    Kip Kniskern
    • If skype is sold

      Like Hotmail before it, I shall stop using its service.

      Anything MS touches, it just ruins it.

      So... bye bye skype!
      Uralbas
      • RE: Microsoft's purchase of Skype: One expensive game of keep away

        @Uralbas thank you, one less traffic!
        gunn13
      • RE: Microsoft's purchase of Skype: One expensive game of keep away

        @Uralbas

        Maybe in your eyes but much of the world disagrees with you.
        bobiroc
      • Probably good for Skype/Microsoft

        @ Uralbas

        It's probably good for Skype/Microsoft if the tiny but noisy group of ideological users migrate to an inferior alternative -- rather like they do with LibreOffice to avoid MS Office, or desktop Linux to avoid Windows.

        Users who are locked into software for ideological reasons don't generate much pressure to improve. They also tend to engage in infighting with other sects within the ideology (e.g. GPL3 v GPL2, GPL v every other open source licence, the OpenOffice/LibreOffice schism, etc.).
        WilErz
      • RE: Microsoft's purchase of Skype: One expensive game of keep away

        @Uralbas Well unfortunately you're going to find that increasingly difficult to do seeing as how Skype has made its way into consumer electronic devices such as televisions, etc.
        findsomecommonground
      • RE: Microsoft's purchase of Skype: One expensive game of keep away

        @Uralbas

        I am gone too. so 2 less traffic! and it will continue to grow
        sadmglw
      • RE: Microsoft's purchase of Skype: One expensive game of keep away

        @Uralbas
        Me gone too. To less sophisticated software as our friend WilErz will tell you that only runs the most sophisticated computers in the world.
        kirovs@...
      • RE: Microsoft's purchase of Skype: One expensive game of keep away

        @Uralbas
        i haven't really used skype ever, now i'm gonna start using it
        ozinanoypi
      • RE: Microsoft's purchase of Skype: One expensive game of keep away

        @Uralbas

        I am not a regular user of Hotmail. But it is just as good as the competition. I some ways better, in others not quite as good, but a very compelling product overall.

        In addition:
        Outlook/Exchange is awesome.
        Excel is fricken' unbelievably awesome.
        Windows 7 is pretty darned good.
        xBox is none-too-shabby.
        Visual Studio is best-of-breed.
        WP7 is looking really nice.
        * And may be a world-beater in some respects if Skype can be properly implemented.

        In short, MS has quite a number of products which they have "touched" and done anything but ruin.
        x I'm tc
      • Leaving too...

        @Uralbas

        Guess even less traffic (and money) for Microsoft. Time to move to Google Voice...

        Note:
        I am not a Microsoft hater I just do not trust them that much.
        Solid Water
      • RE: Microsoft's purchase of Skype: One expensive game of keep away

        @jdakula
        What is awesome about Outlook? Ever since we got it our life has turned to pain and misery. I yet to find a person in our company who likes it.
        kirovs@...
    • The author is wrong, as are you.

      @Kip Kniskern
      Beleive it or not, Microsoft is far more relevant then you may desire them to be, that much has been proven, and skype is a natual addition moving forward. When both Google and Facebook where looking to purchase Skype, I hearn no complaints from you or many others, yet let Microsoft do the same then it suddenly become a different story.

      You are allowing your fear, and jealousy of Microsoft and their acquisition to cloud your judgement.
      :|
      Tim Cook
      • RE: Microsoft's purchase of Skype: One expensive game of keep away

        @Mister Spock

        Well said and very true.
        bobiroc
      • Message has been deleted.

        ScorpioBlue
    • M$ is blowing its last $$$

      @Kip Kniskern
      any startup with a few millions in funding can take on skype. M$ blowing billions to buy a useless service ...priceless!
      Linux Geek
      • RE: Microsoft's purchase of Skype: One expensive game of keep away

        @Linux Geek

        The only thing useless I see here is your commentary. You may not find a use for Skype but many people do. Please do not confuse your biased opinion with fact. It is a mistake you frequently do.
        bobiroc
      • RE: Microsoft's purchase of Skype: One expensive game of keep away

        @Linux Geek
        patents man
        ozinanoypi
    • RE: Microsoft's purchase of Skype: One expensive game of keep away

      Would skype has the same services to offer once microsoft would buy it?

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  • RE: Microsoft's purchase of Skype: One expensive game of keep away

    "Microsoft is clinging to stay (be, at all?) relevant in the consumer space"<br><br>LOL! Perhaps you've never heard of Windows, Xbox, Xbox Live, and Kinect! Are you drunk?

    As for Facebook, an acquisition by Facebook hurts them far less than one by Google, considering the close partnership of Facebook and Microsoft.
    JoeHTH