The net is still shocked by Microsoft's buyout of Skype for $8.5 billion. The adjectives whopping, astonishing, unbelievable, incredible, crazy and stupid are among the most repeated when describing the price Microsoft paid for the VoIP company. People do not forget that when eBay purchased Skype in 2005 it did so for $2.5 billion. That price also seemed very high at that time, people were still remembering the excesses of the dotcom era. However back in 2005 when eBay bought it, Skype was still a promise, a young and innovative company with lots of room to grow and lots of potential for doing so.
While Skype is still young and innovative it can not be considered a promise anymore, but a fully mature company. Its earning reports matter like any other company's and the last one showed a $7 million loss. It has a user base of more than 663 million but as of now, Skype is making a slender profit of approximately 1.30$ per user. These are some numbers that do not help justify the price Microsoft has paid.
But Microsoft knows this, its is impossible to justify the price paid based on the numbers, so they are focusing on the intangible instead. Microsoft talks about seamless integration with its Xbox360 network, about the synergies between Skype and Facebook (which was thought to be a bidder for Skype too and has a partnership with Microsoft) and about integrating it with its latest Windows Phone 7 mobile phone OS.
All of these look like legit reasons for Microsoft to buy Skype; but seriously: who does think these synergies are going to compensate the price paid? Not even in the long term...
For me, the real reason for Microsoft to purchase Skype is mainly:
Putting the Microsoft brand on the side of the consumer. Skype is very well considered by its users and by everyone in general. It has become a kind of 'service for the community', as it allows people around the world to talk and see each other for free (or at very cheap prices). Microsoft has the opposite image, a behemoth corporation focused on imposing its software and monopolizing the OS market (and quite successful in it) to profit from it. Losing this sometimes ugly image is becoming very important to compete with the likes of Google and Apple, the other two giants in the tech world, specially in the mobile sector.
Microsoft saw the opportunity to increase its popularity and the integration between its services with the acquisition of Skype and did it. But the high price paid means that all eyes will be set on the performance of the acquisition. If the move turns out to be a failure its cost will prevent Microsoft from being able to undo the position by selling Skype for what they paid, much like eBay did when they realized their objectives with Skype had not been met.
Microsoft will suffer from buyer's remorse if the move is not as successful as they expect it to be, because at the price paid, even if the relationship does not work they will be stuck with Skype for a long time...
Putting the Microsoft brand on the side of the consumer. Skype is very well considered by its users and by everyone in general. It has become a kind of 'service for the community', as it allows people around the world to talk and see each other for free (or at very cheap prices). Microsoft has the opposite image, a behemoth corporation focused on imposing its software and monopolizing the OS market (and quite successful in it) to profit from it. Losing this sometimes ugly image is becoming very important to compete with the likes of Google and Apple, the other two giants in the tech world, specially in the mobile sector.
Microsoft saw the opportunity to increase its popularity and the integration between its services with the acquisition of Skype and did it. But the high price paid means that all eyes will be set on the performance of the acquisition. If the move turns out to be a failure its cost will prevent Microsoft from being able to undo the position by selling Skype for what they paid, much like eBay did when they realized their objectives with Skype had not been met.
Microsoft will suffer from buyer's remorse if the move is not as successful as they expect it to be, because at the price paid, even if the relationship does not work they will be stuck with Skype for a long time...
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