Microsoft's Ballmer $7.7-Billion Skype Blunder

Microsoft's Ballmer $7.7-Billion Skype Blunder

Summary: Microsoft is buying Skype, the video and Voice over Internet Protocol giant, for over seven billion in cash and this will help them how?


I'm bemused to see that Microsoft's Grand Poobah Steve Ballmer has blundered yet again. This time, instead of Vista, the operating system that never should have seem the light of day, or Windows Phone 7, the far too little, too late, attempt to play in mobile devices, he's wasted a cool $8.5-billion (Billion!) on Skype.

Seriously? Ballmer just burned more money than Oracle did on buying Sun for a video-conferencing and Voice-over-Internet Protocol (VoIP) company? Come on! The only thing that Skype has over any of the dozens of other video-conferencing and VoIP companies out there is brand recognition and Skype's brand is not worth $850-million much less $8.5-billion.

I mean, come on, Microsoft already has this technology. They've been selling these services in products like Live Meeting and Microsoft Lync, formerly Office Communications Server, for over a decade now. Sure, hundreds of millions of people already know and use Skype, but how long will they now that Microsoft owns it? I think Harry McCracken, well-known writer and editor, hit the nail on the head when he remarked, "Skype to be rebranded as Microsoft Internet Phone Professional Premium 2012 (KIDDING!)" on Twitter. Boy, I wish I had come up with that line. That's exactly how people will see this deal.

Ballmer's never met a consumer-oriented technology he couldn't foul up. Yes, many people use Skype for work video-conferencing? Why? Because it's free, or the next thing to it, and it runs on Windows PCs, Macs, Linux PCs, and a host of other devices. Does anyone seriously think MS-Skype will really run as well as it ever has on non-Microsoft platforms? Get real. Nothing else ever did, why should Skype be any different?

What I think Ballmer was trying to do was several things. First, he wanted to give the moribund Windows Phone 7 (WP7), a kick in the pants by adding Skype VoIP to it. That's not going to happen. Phone carriers hate, hate, the idea of VoIP on smartphones. As well they should, it cuts directly into their bottom line.

Next, I think Ballmer has delusions that Skype be a gateway drug into Windows back-end servers. This line of reasoning, which is never far from Ballmer's business plans, is that Skype will convince business customers into buying into Business Productivity Online Standard Suite (BPOS) That, in turn, with Exchange and SharePoint, would mean getting them to buy into Active Directory and Windows Servers, etc. etc.

It's too bad that I think that Microsoft already has all the BPOS customers it's going to get. Sure, Skype's attractive, but people use Skype instead of Live Meeting because it's cheaper than buying into the whole Microsoft server infrastructure thing.

Page 2: [Skype's Technical Woes] »

Skype's Technical Woes

Besides, there's technical trouble here. Skype, which is really pretty lousy software, is based on the Kazaa, an early 2000s peer-to-peer file sharing network protocol. That protocol is still in there. Adapting it to Microsoft's server-centric architecture won't be easy. In fact, to do it would take as much effort to create their own video-conferencing and VoIP system. Oh wait, Microsoft already did that didn't they? So what exactly is Microsoft buying?

Or, Microsoft could keep Skype's junky technology. Of course that means that every Skype user, even on Macs or Linux PCs, will have a Microsoft program constantly running in the background. Yeah. That's going to go over well.

On the other hand, Ballmer made a lot of noise about how MS-Skype would be great for home video-conferencing and the like. Funny, didn't Cisco just deep six their efforts in that line? Why, yes, Cisco has downgraded Umi haven't they. Again, let me just point out that Skype was wildly popular not because of quality but because it was free. I hope Ballmer isn't hoping home-users will pay for this purchase by paying use-fees for video-conferencing.

Last, but not least, you know before Ballmer spent the big bucks on Skype, there was a lot of talk about Google or Facebook buying Skype. I wonder if Ballmer, who's never been the sharpest knife in the drawer, was suckered into paying more for Skype than anyone rationally would have paid for it because he was afraid Google would buy it? I doubt that keeping Skype out of Google's hands was Microsoft's primary motivation, but I suspect it did have a lot to do with Microsoft over paying for Skype.

So what happens now? Well, first I see a lot of worried users looking around for an alternative. Heck, I'm already getting e-mails asking for alternatives. My off-the-cuff recommendation, by the by, is to give ooVoo a try.

Next, I see ooVoo, and a lot of other companies and open-source developers, getting really busy with improving their VoIP and video-conferencing apps. I see Microsoft's move as ending Skype's popularity and opening the doors for someone else to become the go-to VoIP/video-conferencing company.

What do you think? Ballmer's dumbest move in years or stupidest move in years? You decide!

Related Stories:

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

Microsoft meets Skype: It's about the video conferencing plumbing

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

Skype patches 'wormable and dangerous' Mac OS X bug

Topics: Telcos, Collaboration, Windows, Unified Comms, Software, Servers, Operating Systems, Networking, Microsoft, Hardware, Social Enterprise

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  • RE: Microsoft's Ballmer $7.7-Billion Skype Blunder

    It's a direct response to the popularity of Facetime on Mac platforms.
    Real World
    • RE: Microsoft's Ballmer $7.7-Billion Skype Blunder

      @Real World
      Somehow I doubt Steve Jobs cares... he's probably also going wtf is Ballmer thinking. I hope Bill Gates gets off the philantrophy horse and comes back to MSFT.
      • Gates actually not a lot less delusional than Ballmer; you might want to ..

        @Hasam1991: ... remember "Microsoft Watch" or "Microsoft Bob", or Gates' "visionary" quotes about how there is nothing about iPod/iPhone/iPad he wishes Microsoft would have done -- especially since these devices do not have physical keyboard and stylus.

        Yes, Gates really said that; twice at different times (in 2007 and 2010).
      • RE: Microsoft's Ballmer $7.7-Billion Skype Blunder


        "Fake" Steve Jobs did a pretty good article about just this same thing when Microsoft was courting Yahoo. Something to do with also-rans and a three-legged race come to mind.
      • RE: Microsoft's Ballmer $7.7-Billion Skype Blunder

        @Hasam1991 - Why? BG sucks. He is a money grubber. Nothing else.
        The Danger is Microsoft
    • RE: Microsoft's Ballmer $7.7-Billion Skype Blunder

      @Real World

      It's actually fine and SJVN is apparently living in a parallel world. Vista didn't suck, the bloggers and ABMers did, the rest of us used Vista until Win 7 came along. Apparently SJVN also can't understand a modern UI, as WP7 is still the best phone OS out there at the moment. Now in final befuddlement SJVN can't see why MS would buy Skype.

      YOu have a choice SJVN - an asvertising company (Google), a packaging and marleting company (Apple) or a software development company - who do you think is going to win? If you think it's Apple, then you really do believe there's one born every minute ;-)
      • Meanwhile in the present reality

        WP7 sales are moribund at best, companies aren't escaping the clutches of XP all that much. That and there is no explanation from Microsoft or Skype how this deal is going to make anyone any money.

        Ok, back to your parallel universe, you probably are incapable of living in the real world.
      • Wow, that post is a keeper

        Windows ME probably didn't suck either, or Windows NT server;-)

        WP7 sales about to go through the roof once the market discovers what they're missing;-)

        What kind of "software development company" buys Skype? And for USD8billion: equivalent to their entire R&D budget for a year (not that it produces much).

        Funniest post ever written!
        Richard Flude
      • RE: Microsoft's Ballmer $7.7-Billion Skype Blunder

        Vista didn't suck? lol! That's a good one! It was really really bad for the first 6 month until SP 1 came out. This more than just ABMers and bloggers saying it.
      • Your right. Vista didn't suck.

        Yes, the fact is where I work plenty used Vista and the dumb complaints stopped just as soon as people learned it wasn't that different to use then XP.

        Vistas problem wasn't that it sucked, its problem it wasn't much better then XP. And in some instances wasn't any better then XP, so I guess if in your world that equates with "sucks" then so be it for you, but there were plenty of us out there using it who liked it just fine.
      • Message has been deleted.

      • RE: Microsoft's Ballmer $7.7-Billion Skype Blunder

        @tonymcs@... I am with Tony, I have a mac, I have androids, I have win7 and I have played with an ipad. win7 mobile rocks. But on a different note, SKYPE, yeah it is an odd one but then I don't think that Microsoft is really buying the technology, it is the userbase!!! Unless my sums really suck (probably do) they paid like $15 a user - pretty cheap I am thinking. Skype may not be particularly profitable but then there could be a host of real reasons for that and Microsoft is getting better at plugging revenue leakage holes. I also reckon that 25Million concurrent users makes it a pretty compelling advertising platform!
      • RE: Microsoft's Ballmer $7.7-Billion Skype Blunder

        @tonymcs@... Boom! :-D
      • Message has been deleted.

      • RE: Microsoft's Ballmer $7.7-Billion Skype Blunder

        @tonymcs@... You refer to Microsoft as a "software development company". Who are you trying to kid. Microsoft has only one purpose and that is making lots of money. A company dedicated to software development would have consistency across the Office suite (try setting the default save folder in Excel and in Word - similar aren't they????) and a decent file manager. Windows Explorer is sadly lacking in so many features:<br>1) can you FTP through it?<br>2) can you print a list of the contents of a folder?<br>3) can you view all files in a folder including those in subfolders as a single list?<br>4) can you apply a filter to a listing of folder contents?<br>These are just a few aspects of Microsoft's software that need correcting. But let's be fair, Microsoft Office has been under development for only 20 years or so (and Windows Explorer even longer if we include its early incarnation as "File Manager") and it takes time to get things right.
      • RE: Microsoft's Ballmer $7.7-Billion Skype Blunder

        @tonymcs@... And if you believe half of what you're saying here, then you must be hiding the same cave that Steve Ballmer is... If you're being sarcastic, and I now look like an ass, then my bad! :)
      • RE: Microsoft's Ballmer $7.7-Billion Skype Blunder

        @tonymcs@... Hear! Hear! Spot on!
      • RE: Microsoft's Ballmer $7.7-Billion Skype Blunder


        You're saying they paid $8.5B, not for the tech, but for the userbase?? Then that truly IS the worst business decision ever. It's a userbase that is already entrenched in getting something (useful?) for free. The second Microsoft tries to recoop that $15/person in any way (including advertising), there'll be an exodus and that userbase will move somewhere else.

        As for @tonymcs@..., you're technically correct. Vista didn't suck (much). It was just unusable by the vast majority of it's users because of poor driver support. And, in the end, that equates to the same thing as "suck". If you can't use a product, you really don't care the reason, you just know it's getting in the way of your day.

        Is Win7 Phone the best mobile OS out there? I don't know. It's a subjective call, but I kind of like it the little I've used it. I'm on the fence about buying one. But for dang sure the fact that it "now has Skype" isn't going to sway me. It's a PHONE. Why would I need a V/VoIP solution on a PHONE? With my data plan, I would pay more per-minute for a V/VoIP call than I would for a call that used regular plan minutes. Particularly now that all the major carriers are backing away from unlimited data plans.

        You left one "choice" off your list, tony. NO one had to buy Skype. And, from where I stand, this would've been the smartest choice.
      • RE: Microsoft's Ballmer $7.7-Billion Skype Blunder

        @john.foggitt - I just tried it on Office 2007 and 2010. The interface is identical. Getting there is identical. I don't know what version you are on, but if you are going to rant, at least you should get the rant right. And I am not at all sure what your supposed failings of Windows Explorer have to do with whether Microsoft is a software developer. The things you mention are nice from a power user sort of level, as many of the Linux crew are, but are next to useless for the vast majority of their customer base. It isn't very good business to go after highly esoteric features that no one uses at the cost of the things the bulk of the user base want and need the software to do. So, rant all you want. It doesn't change the fact that they have developed some of the most used and most deployed software in the history of computing. Most of us are not old enough to remember life before Windows (and the Mac) and Office. I am. It was not easy to do, not easy to support, and very, very expensive in both time and money, especially if you were pushing the limits in any real way. These software developments were what really allowed personal computing to expand beyond a toy (even a business toy) for the techies into a black box that anyone can operate. This was huge. And that is what really came out of MS and Apple. One thing you can't assail MS for is lack of software development.
      • RE: Microsoft's Ballmer $7.7-Billion Skype Blunder

        @john-foggitt: Are you entirely retarded?

        <b>1) can you FTP through it?</b>
        Yes. Type into the address bar and off you go. If you want to return there regularly, add a network place.

        <b>2) can you print a list of the contents of a folder?</b>
        You want a screenshot or a list of the files? The former is entirely possible, but I'll grant you that the latter might be a little more tricky. It's a very minor edge-case, however since very few people will want to print a list of files in an Explorer view.

        <b>3) can you view all files in a folder including those in subfolders as a single list?</b>
        Yep - navigate to the folder you want to view from and then type *.* into the search box. Voila.

        <b>4) can you apply a filter to a listing of folder contents?</b>
        Yes - navigate to the folder you want to search and type *.docx (or whatever) into the search box. Voila.