Between the Lines
Larry Dignan, Andrew Nusca and Rachel KingMicrosoft's purchase of Skype: One expensive game of keep away
By Larry Dignan | May 9, 2011, 9:06pm PDT
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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Larry Dignan
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Larry Dignan
Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CNET News.com. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism and the University of Delaware.
For daily updates, follow Larry on Twitter.
Andrew Nusca
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Andrew Nusca
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Andrew J. Nusca is an associate editor for ZDNet and SmartPlanet. As a journalist based in New York City, he has written for Popular Mechanics and Men's Vogue and his byline has appeared in New York magazine, The Huffington Post, New York Daily News, Editor & Publisher, New York Press and many others. He also writes The Editorialiste, a media criticism blog.
He is a New York University graduate and former news editor and columnist of the Washington Square News. He is a graduate of the Columbia University Graduate School of Journalism. He has been named "Howard Kurtz, Jr." by film critic John Lichman despite having no relation to him. He lives in his native Philadelphia with his wife, cat and Boston Terrier.
Rachel King
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Rachel King
Rachel King is a freelance journalist based in New York City and San Francisco. She has previously worked for The Business Insider, FastCompany.com, CNN's San Francisco bureau and the U.S. Department of State. Rachel has also written for MainStreet.com, Irish America Magazine and the New York Daily News, among others. Rachel has a B.A. in Mass Communications and History from the University of California, Berkeley and a M.S. in Journalism from Columbia University, where she served as art director for the student magazine, Plated. Currently, Rachel also blogs about travel industry news and trends for True/Slant.
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.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.
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.
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Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic.
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Larry Dignan
Larry Dignan has nothing to disclose. He doesn̢۪t hold investments in the technology companies he covers.
Biography
Larry Dignan
Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CNET News.com. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism and the University of Delaware.
For daily updates, follow Larry on Twitter.
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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
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"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.
RE: Microsoft's purchase of Skype: One expensive game of keep away
@JoeHTH Yeah, I've heard of them. OSB lost $2.5B last year (E&D, which includes Xbox, etc., didn't nearly make up that ground). Bing/Yahoo! is performing below expectations, Windows Phone is fraught with problems, Windows is losing share to the likes of the iPad (we're talking consumer, here).
Will Skype continue to work on other platforms?
Today I can get Skype for: Windows, Mac, Linux, Android, iPhone, Symbian and other platforms. What will become of Skype if Microsoft buys it? Do people use Skype on Non-Windows platforms?
RE: Microsoft's purchase of Skype: One expensive game of keep away
@Earthling2
Dude as usual, they will make it Windows specific. ughStrong 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.
RE: Microsoft's purchase of Skype: One expensive game of keep away
MS trying to stay relevant in the consumer space? So how many dollars does Google earn directly from consumers? My guess is close to zero. Bing, XBOX, Kinect, MSN, Hotmail, XBOX Live, Windows 7, etc are consumer plays & MS has far more consumer touch points than Google, I would say.
That said, this looks like a stupid aquisition to me. Lync on its own was doing just fine. They just needed to do a consumer version of Lync & they could have blown Skype.
RE: Microsoft's purchase of Skype: One expensive game of keep away
skype made 7 million dollars in loss last year
RE: Microsoft's purchase of Skype: One expensive game of keep away
way over priced, this will only hurt the microosft online revenues and bottomline, they could have gone for a partnership with skype or with facebook in buying skype and integrating it with both facebook and wp7, this would have allowed them to be more than competitive with android and iOS...now the real question can they make skype there USP in WP7 and still keep friends with mobile network providers, if they can than its a big win, if not....i see the stock tumbling even further
Perfectly aligned with Microsoft's customers
This is not a "keep away" strategy. This probably means Skype on Xbox and via Messenger and Windows Live, and webcam video Skype web apps in the browser via Silverlight, and of course Skype apps on Windows Phone. It's obvious how this aligns with popular existing Microsoft services and products.
Skype on Facebook
This could facilitate Skype integration with Facebook for chat, webcam, etc.
RE: Microsoft's purchase of Skype: One expensive game of keep away
Better Microsoft than Facebook.
Writing on the wall: Microsoft 'Windows' Gravy Train is coming to an end
Microsoft must diversify to survive.
RE: Microsoft's purchase of Skype: One expensive game of keep away
Now soon they will kill Skype for Mac and Linux and make it Windoze specific, as usual. Microcrap please die
Skype recruited Nokia cream
That's funny, Skype was recruiting the cream of Nokia team after Nokia gutted its OS.
Those programmers will end up working for Microsoft, so effectively, Microsoft would also get the best Nokia programmers as part of the deal.I don't think Skype is worth that, but there may be indirect gains there like that. At the end of this process I expect Nokia to be a gutted shell, Elop to be richer, and MS to control Nokias core business.
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Tuesday 10 May 2011
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