It couldn’t have come at a better time than this. We had been anticipating the official word on the Microsoft’s acquisition of Skype since early morning and word has been rolled out that the acquisition has been finalized and done with. The rumored buyout price was $7 Billion and the tech community across the globe thought it was far fetched. Here’s a shocker; Microsoft paid a healthy $8.5B for its acquisition of Skype, giving it a total control of the company, even the $686M debt on it.
We had already been speculating that the deal would largely benefit the long reigning software giant, proving advantageous to its mobile and gaming platform; the Windows Phone 7, Xbox and the Kinect. That’s indeed a huge boost, given that Skype has over 150 million users connected using its platform, a haven for Microsoft to thrive on and further enhance communication across its numerous platforms. However, despite its surging popularity, Skype isn’t as profitable as one would anticipate for a service of this magnitude.
From the press release issued by Microsoft, Skype will become a new division of Microsoft and Tony Bates, CEO of Skype will continue as the President of this Microsoft-Skype Division. In a statement, Bates mentioned:
Together, we will be able to accelerate Skype’s plans to extend our global community and introduce new ways for everyone to communicate and collaborate.
Steve Ballmer, CEO of Microsoft stated:
Tony Bates has a great track record as a leader and will strengthen the Microsoft management team. I’m looking forward to Skype’s talented global workforce bringing its insights, ideas and experience to Microsoft.
Also Microsoft will continue to invest and support Skype’s clients on platforms other than Microsoft. It will be interesting to do a dissection of what the names involved get out of the deal. I had been of the opinion that eBay will be all lost at letting go off Skype. But that’s not the real deal as everyone who has been involved gets to take home a healthy sum. Following is a bit of a distribution:
eBay – Takes $2.5B as it has 30% shares, quite intelligent of it to not sell the entire share off.
Niklas Zennström and Janus Friis – the cofounders of Skype had 14% shares and would thus take $1.19B combined
Silver Lake, Andreesen Horowitz And Canada Pension Plan Investment (CPPIB) with their 56% share take the remaining $4.5B plus from the deal.
Coming over to how this proves beneficial for Microsoft, to be honest the software giant has a lot when it comes to integrating Skype across its platforms and services. Lets break it in points and put them forth:
Windows Phone 7 – This in my opinion is one of those products that will greatly leverage the Skype deal. Though nothing is happening overnight but with Skype video calling readily available, Microsoft will have to reset its minimum hardware needs for the WM7 devices. A front facing camera utilizing the video chat feature powered by Skype would put WM7 in better competition with the likes of the iPhone 4 and the Android devices.
Xbox Live and Kinect – The two will be able to improve on the existing video capabilities available. I would recommend our readers to pay a visit to MIT Media Lab and learn more about Kinected Conference. With this deal Microsoft will readily be able to take call on Kinect to any other device and vice versa. This would of course mean revamping certain things within Skype’s own platform.
To me this would be a great competitor to Apple’s Facetime and Google Voice, bringing Microsoft in a closer competition.
With over 170 million users, of which over 30 million are always online at any instant and a staggering 200 plus billion minutes of both video and voice used via Skype in 2010 alone, Microsoft his bagged the right name with this deal. Lets see how this fares for both in the long run.
Special thanks to GigaOm for figures.