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Microsoft's Ballmer $7.7-Billion Skype Blunder

Microsoft is buying Skype, the video and Voice over Internet Protocol giant, for over seven billion in cash and this will help them how?
Written by Steven Vaughan-Nichols, Senior Contributing Editor

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!

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