No pressure, people.
Under the terms of the agreement, Skype will become a Microsoft division headed by Skype CEO Tony Bates, with its services meshed with a variety of Microsoft products such as the Lync unified-communications platform, Outlook and Xbox Live. The incorporation of Skype's assets into those products represents a substantial challenge, even before you add Microsoft's determination to monetize its new toys.
Skype's audience is used to paying little or nothing for VOIP and video calling; if you change that, there's a significant chance they could run for the hills. If you lard up the Skype/VOIP experience with ads, you likewise risk alienating that core constituency--and sending them right into the loving arms of Google and Apple.
As I mentioned in an eWEEK article yesterday, Microsoft will also need to find a way to preserve Skype's immense brand equity--after all, it's a big part of why the software giant paid that $8.5 billion. Big enterprises have an unnerving habit of acquiring startups and smaller companies, only to smother everything that made the latter so appealing in the first place. If Microsoft tarnishes the Skype brand, that would dampen its ability to present strongly in the communications space--and raise serious, stockholder-frightening questions about its ability to execute on strategy.
Yep, no pressure at all.
This isn't Skype's first time on the acquisition block. In 2005, eBay paid some $2.6 billion in cash and stock for the then 2-year-old communications company. Four years later, the auction site sold a majority of its Skype holdings to a team of private investors (including Silver Lake Partners and Andreessen Horowitz) for $1.9 billion in cash.
"Wall Street hated the deal when eBay bought it, and they only paid 1/4 of what Microsoft is now paying," Roger Kay, founder and president of Endpoint Technologies Associates, wrote in a May 10 email to eWEEK. "In eight years, Skype hasn't made any money, and even at the operating level, it would take three decades to pay out in cash terms alone."
Some analysts have been more optimistic.
"While it's true that Skype has been slow to make money off its service, the potential is there," Forrester analyst Ted Schadler wrote in a May 10 blog posting. "Local phone numbers, three-way video conferencing, business administration, and making calls to real phone numbers are all things that people will pay for." It could also boost the consumer appeal of Microsoft's more business-centric products, notably Lync.
I guess we'll just have to see.
Abbie Cornish Adriana Lima Adrianne Curry Adrianne Palicki Aisha Tyler Aki Ross Alecia Elliott Alessandra Ambrosio Alexis Bledel Ali Campoverdi
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