Another landmark of a deal in the Internet scenario that you can’t fail to notice. Global major IT software products company Microsoft announces buying out Skype, an Internet telephony services product for an hefty amount of $8.5 Billion in cash. Valuation of businesses/ products are getting complex and are reaching new scales these days viz – the Twitter valuation by Google and likewise.
In this particular deal, Microsoft CEO Steve Ballmer announced that Skype will give them the platform to “Reach Everyone on the Planet” – a note to match their global mission to bring people closer together through technology and make their lives better. Ballmer predicted – “We will move beyond email and text to rich experiences. Talking to colleagues across the world will be as seamless as talking to them across the table.” Its noteworthy that 40% of the Skype traffic is video. At the juncture of this deal being worked out, Skype has about 170M users and growing at around 40% year over rate. About 600K new registrations take place everyday which generated about $860M in revenues during 2010 (a growth of 20% year over). Skype was on its route for an IPO and for Microsoft it was the best time to buy out the company ‘cheap’. Microsoft made the unsolicited offer to Silver Lake Partners, the lead investor of the syndicate that had earlier bought over Skype from eBay about 18 months back. Around Sept’09, eBay had sold Skype for about $2.75 Billion (for 65% of Skype ownership).
On the other hand, Skype looks at the deal, that will be able to take Skype beyond personal computers, mobile phones and connected TVs to a whole range of MS products including XBOX, Windows Phones, Outlook, Messenger, Lync and Hotmail … to name a few. Tony Bates, current CEO of Skype, will continue to be the Head of the Skype Division within the Microsoft Business and lead innovation and integration of the product with MS products / mission statement.
But is the buy worth the money? To buy out path-breaking innovations on the Internet platform continues to be the guiding principle for Microsoft. However, Skype can be seen as a late acquisition of an innovation whose earlier adoptation and integation by Microsoft could have taken it to further heights. Intrinsically Skype is not social. Possibly Skype has surpassed its prime to be and ride the great power of the Microsoft. On the other hand, Microsoft would have to plan the integration model of Skype into its products and solutions to get the best returns of their bet …. a late bet, if it may be so called.
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