Why Skype Is Microsoft's Chance to Shine at Integration

Loraine Lawson

Wouldn't it be great to know how Oracle or IBM handle integration after a merger and acquisition? I've heard Oracle's got it down to a list. I'd love to get a peek at that.

 

On the other hand, if you're curious about what NOT to do, check out Microsoft's handling of post-acquisition integration. It's not a pretty track record, as Steven D. Jones of the Dow Jones Newswire points out in an article about Microsoft's recent purchase of Skype. Writes Jones:

Microsoft Corp.'s future with Skype SA will depend largely on whether the software giant can overcome its past. Microsoft, which agreed to pay $8.5 billion to buy Skype, will need a new approach to integrating acquisitions if it wants its investment in the Internet telephony giant to pay off.

Not all of Microsoft's acquisitions have failed, of course, but most of the nearly 20 acquisitions made in the last 10 years have not fared well, Jones states. One analyst he spoke with points out Microsoft often shoots itself in the foot by rewriting acquired software into its own style while the industry moves on.

 

The article doesn't provide any specifics about how Microsoft handles integration, either on an organizational level or a technology level. But it's kinda hard to argue with the results:

Evidence of Microsoft's integration style is easy to find. Over the past 10 years, the company's revenue and net income have more than doubled and its net profit margin has risen above 30% from the mid-20% range. The problem: Almost all of those gains were driven by the Windows operating system and Office applications suite, businesses Microsoft built.

Microsoft will retain the company as a separate division, which experts say is one positive sign Redmond is trying a different M&A integration strategy with Skype.

 

There's a slew of theories out there about why Microsoft wanted Skype: It wants to beat Google, it wants to beat Apple via video chat for the tablet and one article even claimed the buyout was motivated by "corporate desperation."


 

Whatever the reason, the success or failure of this acquisition will rest on integration. And there are plenty of options for where to integrate Skype:

 

In short, with the right integration, this deal could be brilliant and actually become a strategic advantage for Microsoft's products. Or, it could send Skype's 8.8 million paying users - myself included - stampeding to Google Voice.



Add Comment      Leave a comment on this blog post
May 22, 2011 12:14 PM Daily Deals Daily Deals  says:

The history of Microsoft and aquiring companies is sketchy.. They have seen alot of directors of companies come across with the purchase, however within a few years, most have left the company, with plenty of mmoney in their pockets of course. However with the head of the company, Bill and high flying business colleges, such as warren buffet, its no wonder that they have such a business acumen in take overs and posting profits. I would like to know however how they are going to cope with the Goolge takeovers and things such as the new crazy of coupon buying and how that will effect their growth in that internet medium.

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May 22, 2011 12:34 PM Brian Brian  says:

One thing I cannot understand, is how will they make any money from this deal?

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May 23, 2011 5:00 AM MCK Coastal MCK Coastal  says:

I can not even remember all the little Apps and lovely software that Microsoft has chewed up over the years and integrated the core functionality in some form into other Microsoft products but I would love to take a trip down software memory lane and see a time line of software releases and prior acquisitions.  Yes that would be a great read indeed.

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May 23, 2011 10:32 AM eric bergstrom eric bergstrom  says:

It will be interesting to see how the skype acquisition integrates with lync in the business phone service niche.

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