After hearing a good deal of rumors around Skype’s acquisition, Microsoft finally silences the competition, marking its largest acquisition to date in an all-cash deal of a whopping $8.5 billion. It is the latest addition to Microsoft’s division and will be running under the leadership of CEO Tony Bates. Skype offers free online messaging, voice and video calls, as well as connect users to landline and mobile phones via flexible paid plans.
“The combination will extend Skype’s world-class brand and the reach of its networked platform, while enhancing Microsoft’s existing portfolio of real-time communications products and services,” the companies said in a statement.
Microsoft’s shares have spiraled down a bit after the buy out, landing at $25.72 in early trading. However, it means a promise of a stronger US local and overseas economy, thus, spiking up the US stocks by 1.5 percent. Also, Wall Street can’t hide its excitement over the deal, well not after Microsoft’s fail over its attempt to acquire Yahoo for $47.5 billion in 2008.
Prior to Skype, Microsoft’s largest buy out was that of online advertising firm aQuantive in 2007 for $6 billion. Skype was founded in 2003 and was acquired by eBay, then purchased by Silver Lake for only a little over $2 billion in 2009 before it finally got into Microsoft’s hands. It currently has 170 million users who accumulated 207 billion minutes worth of chat last year.
Considering that Silver Lake acquired Skype for only a little over $2 billion, is the $8.9 billion acquisition by Microsoft overrated? Somehow, it is, but looking into Microsoft’s plans in maintaining its tight grip of the tech industry even in the conclusion of the PC era, it might actually be a smart move. Your device might not be running Microsoft, but one way or another, you’re actually still dealing with Microsoft via various other touch points, including Skype.
And since Microsoft now owns Skype, it means Cisco and Google won’t get it. If otherwise, it will prove problematic for the tech giant as it’s already dealing with the Google-Apple tandem with the availability of Facetime video chat on the iPhone. Furthermore, Skype’s products complement Microsoft’s tools for SMBs and enterprises such as Lync, xBox, Kinect, Windows Phone, and Outlook. Also, let’s not blank over the telecommunications expertise of Cisco-veteran-now-Microsoft CEO Tony Bates.
“Many observers believed that as the world inevitably transitioned to mobile and Web, Skype would be left in the dust,” said Ben Horowitz, general partner of Menlo Park-based venture capital firm Andreessen Horowitz and an owner of Skype along with Silver Lake wrote in a blog post. “In retrospect, it was easy for people to underestimate the quality of the Skype engineering team and the power of Skype’s network effect.”
As creepy as it sounds, Steve Ballmer’s promise might not actually be that far-fetched considering the way Microsoft is moving its pieces on the board. “Whatever device you use, now or in the future, Windows will be there.