Why Microsoft's Acquisition of Skype Really Matters

David Tan
In what can only be considered a shot across the bow to its chief rival Google, Microsoft this week shelled out $8.5 billion to acquire Skype. The price tag represents the highest total Microsoft has ever paid for an acquisition, so it's pretty obvious to conclude that this was something it felt was important. Time will tell what the long-term plans for the new division will be, but it's never too early to speculate about the motives.

Microsoft already has a fairly robust VoIP platform on the business and enterprise side with its Lync platform. Since the launch last year, Lync has gained a ton of critical acclaim and a lot of market momentum. And while this is a great product line in the business space, there is really no consumer component to speak of, which is probably where Skype comes in. With the growth of its consumer side business (particularly in the Xbox space), Microsoft has had to start really paying attention to these customers in the past five years or so. Its MSN Live Messenger product was OK, but frankly it wasn't going to get it done in head-to-head showdowns with everything from FaceTime to iChat to GoogleTalk. 

By taking Skype into the fold, Microsoft has guaranteed that every Windows PC that has the MSN software installed will be able to communicate (via Skype) with every client, from Mac to Linux to every flavor of smartphone. Just being able to untangle the mess that is consumer VoIP will become a tremendous win for Microsoft in both the short term and long term.

Clearly, however, Microsoft's vision has to go deeper than that. Microsoft CEO Steve Ballmer talked at the press conference about integrating the Skype capabilities into everything from Xbox to Office, and creating a world where interactions aren't limited 'by distance or device.' Also, don't forget that Microsoft's strategic partnership with Facebook means it's likely we will see Skype integrated into that platform in the very near future. With the ability to put Skype in so many platforms that people already use, it is destined to become the communication standard in the next few years - far more than it is today.

Some will argue that Microsoft paid too much for the company. This is debatable, and the fact that it was able to use overseas cash that is difficult to invest in U.S. companies makes the price tag seem a lot more reasonable. There is no doubt other companies with deep pockets were also interested in the purchase, so this was a matter of getting the deal done before sparking some sort of a bidding war.

The acquisition instantly makes Microsoft the industry leader in consumer Web-based communications. The fact that Microsoft will be able to grow the platform instantly makes it even that much more powerful and probably signals the beginning of the end for all but the largest competitors. Once Microsoft really integrates the product into its current offerings, and eventually links up the consumer and business sides of the business, we will have a very clear leader in the communications space as a whole. I have no doubt this day will come sooner than later, and most of us will look back on this $8.5 billion as a small price to pay - as incredible as that is to imagine.
 



Add Comment      Leave a comment on this blog post
Jun 7, 2011 6:06 AM Office 2007 Office 2007  says:
I have no doubt this day will come sooner than later, and most of us will look back on this $8.5 billion as a small price to pay � as incredible as that is to imagine. Reply
Jun 30, 2011 2:06 PM Pos Pos  says:
I cannot disagree, hope this will be useful.. Reply
Jun 30, 2011 2:06 PM Pos Pos  says:
I cannot disagree, hope this will be useful.. Reply

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