Microsoft close to buying Skype for $7 billion? Really?

Microsoft close to buying Skype for $7 billion? Really?

Summary: The Wall Street Journal -- citing those infamous "people familiar with the matter" -- is reporting on May 9 that Microsoft is close to buying Skype.

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The Wall Street Journal -- citing those infamous "people familiar with the matter" --  is reporting on May 9 that Microsoft is close to buying Skype.

To quote a Microsoft ad campaign, "Really?"

The Journal says Microsoft is willing to pay $7 billion-plus; The New York Times is saying $8.5 billion to grab the VOIP company that lost $7 million last year. And AllThingsD also is claiming $8.5 billion, and, as of 11:30 p.m. ET, is saying Microsoft will announce the Skype purchase first thing on May 10.

Like Business Insider's Matt Rosoff, I was skeptical that Microsoft might make good on the rumors and buy Skype. I also felt the potential deal (first rumored by GigaOm's Om Malik) made no sense.

For one, Microsoft execs seem to have finally decided that Microsoft's history of assimilating successfully its big acquisitions was a mixed bag (to be generous),  resulting in the company shying away from anything but relatively minor, targeted acquisition in the last two years. Partnerships, like those Microsoft recently struck with Nokia and Yahoo, seemed to be Microsoft's new favored way of getting the technology it wanted without having to buy a company outright.

In addition, Microsoft has spent considerable time and money to build its own voice-over-IP/unified communications platform, known currently as Lync (and formerly as Office Communications Server). Lync is Microsoft's all-in-one VOIP, business instant messaging and audio/video conferencing product.

Microsoft has been touting plans to create Lync clients for Windows Phone 7, iPhone, and possibly Android phones. Microsoft execs have talked up the ability of Windows Live Messenger to interoperate with Lync. They've promised Kinect support for Lync. And they've announced plans to field a Microsoft-hosted version of Lync, known as Lync Online, as part of its upcoming Office 365 launch this summer.

Yes, Lync is nowhere near the household/consumer name that Skype is. But is it worth multiple billions to buy Skype, simply to keep it from Google's or Facebook's clutches?

Maybe the answer to that is yes.

What's your bet? Will Microsoft buy Skype? And should it?

Update: AllThingsD also is saying that Charles Songhurst was key in helping Microsoft CEO Steve Ballmer broker the Skype deal. Interestingly, Songhurst also was credited with helping  convince the Microsoft brass to call off the Yahoo acquisition.

Topics: Collaboration, Banking, Enterprise Software, Microsoft, Operating Systems, Software, Windows, Social Enterprise

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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34 comments
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  • RE: Microsoft close to buying Skype for $7 billion? Really?

    Microsoft+Skype would offer nice integration in XBox+WP7+integrate with lync. but i'm not sure if purchase would make sense, at least not for $7 billion.
    eatredmeatfeelgood@...
    • RE: Microsoft close to buying Skype for $7 billion? Really?

      Somebody please fire screaming monkey Ballmer.

      7 BILLION?? REALLY??????
      nomorebs
      • RE: Microsoft close to buying Skype for $7 billion? Really?

        @nomorebs Yes and its also been confirmed :)
        But for $8.5 million :D
        StallineA
  • RE: Microsoft close to buying Skype for $7 billion? Really?

    If they do, I *really* hope that they won't follow the past pattern of dropping cross-platform support. Being able to run Skype on both my Windows PC and my Android phone is one of its' great strengths.

    Keep it far-far-far away from the WinMo, msn/live/bing teams, please...
    KristoferA
  • RE: Microsoft close to buying Skype for $7 billion? Really?

    If they did buy Skype, do you think they'd continue to support Skype for Mac? ;)
    Imrhien
    • Multiplatform support

      Well... the Lync team has said it is doing clients for WP7, iOS and possibly Android... So they're already doing multiplatform support. Lately, a number of MS teams (Bing, OneNote, Lync, Azure) have been supporting non-Windows clients... So there is a precedent... MJ
      Mary Jo Foley
      • History says different

        @Mary Jo Foley History has show that once MS takes a grab of a good product, it drops development for cross-platform support almost immediately. It is a pattern that hasn't changed.

        Because of that history, you can't blame people for having doubts about future cross-platform support on a very popular service.
        wackoae
    • The other thing, talking platforms, the Skype backend runs on Linux. This

      will be another fiasco like Hotmail, as MS takes years to move the backend over to Windows.
      DonnieBoy
    • RE: Microsoft close to buying Skype for $7 billion? Really?

      @Imrhien
      Skype hasn't supported Mac for a while (with a decent build)
      tech_walker
    • RE: Microsoft close to buying Skype for $7 billion? Really?

      @Imrhien Yes, Steve Ballmer has promised that there will be support for other platforms too :D
      StallineA
  • RE: Microsoft close to buying Skype for $7 billion? Really?

    Well, that'd be the death of Skype. They'd probably make it require Silverlight.
    fastoy
    • And, lets not forget the fiasco they will have converting the backend to

      Windows.
      DonnieBoy
  • Oh man!

    That was my exact same reaction too - "Really?"!!!!!<br>What really upsets me is that they're buying skype just for the user base and not the least for any intellectual/technological wealth.<br><br>However, for all you know, maybe they're planning to go the way of Google Voice and integrate VOIP with network operators? Now, that would be atleast somewhat interesting.<br><br>Still don't see much value to it. They already have a fairly large Windows Live/ Hotmail user base and all the VOIP technology they could need (in WLM/Lync).<br><br>Instead, at this point, Microsoft needs to be seriously investing in in-house hardware manufacture of Windows 8 tablets and package it as a consumer electronic device.<br><br>Aluminium casing/ shiny glass, super slim design and the like. They need to do it and do it ASAP, or Windows8 will be crippled in the face of iPad. And given their hardware track record (XBox, Kinect, Zune, Arc Touch Mouse), they're not half bad at it. <br><br>So far, partner tablet hardware has failed to hold a torch to the iPad design.... Moto Xoom, Galaxy Tab... nothing's working to stop the iPad onslaught.<br><br>Ballmer seems to have lost all confidence in Microsoft's own engineering prowess and innovation, which probably is 2nd to none.<br><br>In the tech world, spending large sums to accquire a user base makes little to no sense, especially when the said accquisition has a poor record of generating profit.<br><br>They instead need to step outside their comfort zone like they did with the Xbox. In fact, the Danger accuisition made more sense too, even if didn't succeed.<br><br>If they wanted to provide something new, they already had all the technical resources and marketshare to do it! geez!
    NorthwoodBlueberry
  • RE: Microsoft close to buying Skype for $7 billion? Really?

    Simply put - it's a numbers game. Adding Skype's global user base to Microsoft's MSN/Hotmail/Live user base is interesting. The number become BIG. So interesting in fact that the old antitrust dog might start barking again. But I'm firmly on the 'do it' side.
    Major Plonquer
  • RE: Microsoft close to buying Skype for $7 billion? Really?

    Office 365 got real interesting all of a sudden...
    dazzlingd
    • RE: Microsoft close to buying Skype for $7 billion? Really?

      Office 365 ... voice and video get global reach..
      ascleong@...
  • There's a tecnical/IT issue...

    ...that MS can't handle: The firewall-evading "secret" protocol, considered a high security risk by the pros.

    How could MS handle that objection without ruining Skype?
    ALISON SMOCK
  • It's about buying customers

    That's it. If Microsoft is buying Skype, it's for the brand and the huge customer base, not the technology - in my opinion.
    mrmckeb@...
  • Strong user base and keep it away from Google

    Thats pretty much it with this one and they paid dearly for it. Microsoft is on to something with this strategy. The company learned a dear lesson when it lost key social media assets like YouTube and even ad technologies like DoubleClick to Google. Doing this will ensure that Google doesn't become a entrenched standard among regular users and SMBs. With the popularity of Skype lately, its no wonder the company went after it. At the same time, makes you wonder whats gonna happen with Lync, Live Messenger and Exchange. Should be an interesting future, probably can expect some built in support in the next release of Windows.

    I guess this also means, no more Skype for Linux. :P
    Mr. Dee
    • The brand/product will lose value as soon as MS takes over

      @Mr. Dee I think the Skype user base will drop substantially as soon as MS take over.<br><br>Sad. Skype is one of the very few cross-platform product that work better than anybody expects. In fact, the qulity of the sound of a FREE Skype-to-Skype call is 1000 times better than sound of a call on any cellphone or even land line phone.
      wackoae