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MicroSkype: Microsoft pays $8.5 billion for Skype, to make Xbox, Win 7 phone, Outlook more social [Updated]

Summary: Skype now becomes a business division of Microsoft and MS products like the XBox 360, Windows 7 smartphone and Messenger stand to gain the most from this acquisition.

Gloria Sin

By Gloria Sin for The ToyBox |

Microsoft just acquired Skype for a cool $8.5 billion in cash, which includes the popular Voice-over-IP service's debts and creates an entire business division just for the company at Redmond (Microsoft Skype Business), as reported by GigaOm.

See more ZDNet coverage:

Just why did Microsoft drop so much money for a company that always seem to be on the market the past couple of years (its most recent owners include original founders Niklas Zennstrom and Janus Friis, who reacquired most of the shares from eBay in 2009)? Once you get past the sticker shock, the deal does make business sense for both companies. After all, while Skype has over 663 million (170 million per month) global users and are on many mobile devices, only 8.8 million users pay for the service according to its April SEC filing, so it needs to expand to remain competitive.

Microsoft, on the other hand, have many products that can use Skype's expertise in video chat/conferencing and VoIP (without paying for use of Skype's patents), as suggested by GeekWire and GigaOm:

  • Xbox 360 Kinect + SkypeTV: There is already a video chat feature on the Kinect but a Skype-login and interface could encourage more people to make this a part of their Xbox experience. Skype is already on some televisions so integration with the Xbox seems to be a good fit.
  • Windows 7 OS + Nokia + Skype: This could be quite a powerful combination as more and more smartphones are equipped with front-facing cameras and make use of the 4G network, which means video calls will only become the norm on mobile devices. Plus, it gives the partners an edge against Apple's proprietary Facetime application. Skype users are also able to send SMS messages from the Web to handsets so this could be a great bonus for future customers with Nokia phones running Windows 7.
  • MSN Messenger + Skype: Hopefully, Messenger will be replaced with Skype because IMing on Skype is a breeze but uninstalling Messenger from machines running Windows is a hassle. The combination of Messenger and Skype users will give G-Chat and Google Voice some competition (perhaps to finally roll out to more countries).
  • Outlook + Skype: By integrating your Skype contacts with your email address book to make voice and video calls, Microsoft is looking to the beefed up Outlook to better compete with Gmail/G-Chat/Google Voice.
  • MS Lync, Xbox Live + Skype: These new groups will expand Skype's user base, according to the press release.

As one of the paying Skype users, I'm wary of what Microsoft will do to Skype (will it suddenly require frequent patches and updates to plug security holes, for example?) but hope it can help make Skype even more ubiquitous for digital communication.
What do you think? Was this an inspired purchase or waste of money by Microsoft?
[Source: GeekWire and GigaOm]

Topics: Microsoft, Collaboration, Mobility, Telcos, Social Enterprise

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21 comments
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  • Let's not forget Enterprise space synergies

    Lync + Skype will truly transform the phone system market. As it stands, many of my customers are already replacing their legacy PBX with Lync. Now with Skype, Cisco and Avaya are going to have a challenge to retain their market shares against Microsoft's growing penetration.
    Your Non Advocate
    Reply Vote

    • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone combo?

      that is really a serious deal involving a lot of money

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      jessy.braun84
      Reply Vote

      • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone combo?

        That can lead to more and morew problems. I am not so sure if I was there i could have accepted those conceptions.
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        stephanysun
        Reply Vote

    • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone combo?

      @facebook@...well said Microsoft seems to be on a path to dominate the voice market. <a href="http://lovecalculator2.com"> love calculator</a>
      ericnorman
      Reply Vote

  • Bad For Linux, Mac OS X, Android, iOS, and WebOS Users

    This is bad news for a wide breadth of consumers. M$ competes with all of the above mentioned platforms and more. M$ has a history of pursuing a closed business model and probably won't support all of these systems in the future.

    If you have a Windows PC, Mobile Device, or XBOX, expect to pay for what you get for free right now (i.e. Skype to Skype calls).

    Thankfully, we have Google Voice and other voice and video over IP technology and services.
    nagalman
    Reply Vote

    • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone combo?

      @nagalman What? MS does support OSX with it's flagship product Office. They are a software company and will continue to support those that provide profit. If there is no profit in supporting Linux then they will drop it. MS is not in business for the fun of it...they need to make a profit. Just like everyone else, one way or another.
      smfrazz
      Reply Vote

      • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone combo?

        @smfrazz
        Crazy times are upon us when you are forced to explain such an easy concept to someone
        FlatbushE21
        Reply Vote

      • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone combo?

        @smfrazz - And just as Skype would have eventually had to do, as well. The free call model was great when it started out, and all the coverage on so many devices is terrific, but at some point they would have had to move on to either streamline their business or expand their paying base.
        always-a-geek2
        Reply Vote

    • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone combo?

      @nagalman
      Actually, I think that consumers are more likely to not pay with MS owning Skype. MS is looking for integration to raise the value of its other assets where a "normal" company would be wanting to get revenue back from a large acquisition like this. MS and Google are just about the only 2 companies that don't care about short term revenue streams.

      Ballmer also announced that Skype will stay multi platform and I think that would be the best from a MS viewpoint. They will want Skype inside other platforms to act as a pull to Windows, XBOX and WP7.

      My opinion is that they paid far too much for Skype but that lines up with my "MS doesn't really care about short term money" theory.

      As a friendly comment to you; typing M$ shows such a bias and negative attitude that most people won't look for any value in your comments.
      PhoneBiz
      Reply Vote

    • The fact that you spell Microsoft as M$

      @nagalman
      tells me you not looking at this unbiasedly.
      Bill Pharaoh
      Reply Vote

      • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone combo?

        @Bill Pharaoh If you think you are innocent until proven guility you've never dealt with the IRS. More and more its guilty until you can prove yourself innocent.
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        jawadsatti11
        Reply Vote

  • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone combo?

    Gloria - instead of being a naysayer, why not think positive and say Microsoft could improve Skype. From what I ever saw and my own experiences with Skype it was iffy at best with its shaky pixelated images, and distorted voice quality.

    But then you media type live for the opportunity to slam Microsoft for everything it does even if it is right. Kinda like the republicans slamming Obama for everything.
    javajolt
    Reply Vote

    • Thats a Bandwidth Problem....

      "@javajolt "..Thats a Bandwidth Problem....If You Have a Good Upload/Down Speed ANY VOIP Service Works with No Problem!!
      TheCableGuyNY
      Reply Vote

  • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone

    I swear by skype and I don't want to see it changed either. I'm not a fan of their frequent UI design changes, but I've been a paying user for years now. I could use google voice, but I stick with skype because it just works well.

    I don't know if Microsoft will change skype, but so long as my experience is seamless then I don't mind.
    anonymous
    Reply Vote

    • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone combo?

      @awkward hug : Try Yahooo.Works VERY WELL!!
      TheCableGuyNY
      Reply Vote

  • No, &quot;cash&quot; is not used in buying Skype

    http://www.zdnet.com/tb/1-96977-1869530
    DDERSSS
    Reply Vote

  • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone combo?

    This was a good acquisition for Microsoft. It really does fit into their ecosystem of products. There is no need to hate Skype just because its owned by Microsoft now.
    LoverockDavidson
    Reply Vote

    • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone combo?

      @LoverockDavidson
      There will be plenty who will do just that. By plenty i mean the hating idiots here and places like this. They fail to realize they make up less than one percent of people who use this product. They also fail to realize that most people don't read these blogs and wont even know that Skype changed ownership.
      FlatbushE21
      Reply Vote

  • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone combo?

    I haven't been much of a Microsoft fan, but it is a multi bilion business that keeps up with the competition for ages now, that means they must be doing something right.<br><br>Personally I was more afraid of the takeover of SUN by Oracle, thinking they would stop developing MySQL in favor of the Oracle DB... Yet MySQL is still there and still rocks!<br><br>Microsoft has good developers and I'm sure that they know Skype is a good product that doesn't need too much change.
    tvscoundrel
    Reply Vote

  • RE: MicroSkype: Microsoft pays $8.5 billion for Skype, for Kinect and phone combo?

    Microsoft, on the other hand, have many products that can use Skype???s expertise in video chat/conferencing and VoIP
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    jawadsatti11
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