Microsoft’s $8.5 billion buyout of Skype marks the largest acquisition in the company’s history. But is it really a smart move? Depends on who you ask. GeekWire’s Todd Bishop has pointed out some of the potential benefits, noting that Skype’s integration with Kinect could be a killer application. A partnership also would combine Skype’s growing consumer base (about 170 million worldwide) with Microsoft’s strength in the enterprise.

But there are also some warning signs. Microsoft’s track record of success with big acquisitions has been somewhat mixed, including its last mega buyout of Seattle online advertising giant aQuantive for $6 billion. (Most of the top execs at aQuantive left the company after Microsoft turned its attention to Internet search rather than display advertising where aQuantive shined). Furthermore, Ars Technica notes that there’s considerable overlap between Microsoft’s Windows Live Messenger service and Skype and the hefty price tag values each Skype customer at more than $1,000 each.

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  • Christopher Ross

    It is going to be tough for Microsoft to make a win out of this for several reasons. First, by keeping the Skype team separate from the online services and Office business, they will alienate those teams and limit the interaction necessary for growing a holistic experience for users. Secondly, Skype conflicts with the Live Messenger and Lync products, which will cause confusion not only internally but with consumers and the SOHO/SMB markets. It’s likely they purchased to keep it out of the hands of Google (sure) and Facebook (meh), but it remains to be seen if they actually have a plan. Otherwise they risk another acquisition disappointment like Danger/Sidekick.

  • Kevin Morrill

    Would be shocked if this ends up benefiting shareholders. My vote would have been issuing a special dividend and let investors spend the money on a Skype IPO if it was so great. Microsoft already has so many of these technologies and a larger user base in Live Messenger.


    they can’t even monetize their dated windows live messenger product so how do they expect to monetize skype. i bet they still yield around a .40 cent CPM overall for most of their ‘windows live’ banner advertising programs.

    another throw spaghetti at the wall hail mary from a fubar company run by yes men non-technologists.

  • Joshua ‘Red’ Russak

    Is it fair to say I think you’re over thinking this too much? Skype needs a bit of the corporate touch. I appreciate their technology, but annoyed by how slow they’ve progressed. Obviously their product lasted through the years, but as the space becomes cluttered with more Skype like options (Google Voice), I think this progression was necessary for their overall survival. In my eyes, I’m curious to see what happens. It was simply Skype’s time and I think they made the right move.

    • Mark

      I think the question was does it make sense for MS. Obviously it’s a huge win for Skype.

  • Mordalo

    A great deal for Skype, yet I see no value to MS. Are they so cash heavy that they need this size of a write off?

  • Jeff Rodenburg

    This deal makes sense if it becomes a “whole” greater than the sum of its parts. If they do integration well with the Exchange stack (Outlook, Lync) + IM + XBox, that’s a pretty good offering across those verticals.

    They (MS) can squander this deal if they approach it haphazardly. Maybe the $8 Billion price tag will force them to think a little harder about the situation.

  • Guest

    as the tides came in (1980-2000), the MSFT boat began to rise and drift toward shore. All of the “sailors” were very excited and proud. “Look how much we’re moving!” They exclaimed with great pride. They paddled this way and that looking in the mirror at each stroke. No matter how they paddled, with their nose, with their toe, it didn’t matter, in the ship came with lots of money for friend and foe. Now the tide is slack, but those sailors keep paddling this way and that, with their nose and their toe – and they look with a blank stare. “It worked so well before, my paddling of yore and now we go nowhere yet we paddle all the more” My form is perfect! Look at this stroke! Sorry folks, you’re in the duldrums and you’re lucky just to be afloat. You see your paddling was never perfect and in the end it didn’t matter much. The tide is what did it and you’re out of touch.

  • Sclark

    Kudos to MSFT. This purchase allows them to
    constructively use dead cash that otherwise would face a 35% tax rate to bring
    home. It is synergistic across multiple businesses for improved market share.
    And it provides a disruptive killer app for the Win phone.

    Genius move. I look forward to seeing Skype embedded in
    my next Windows machine running Office/Outlook including a Win tablet.

    • culturalcapitalism

      great point; they are just sitting on cash. didn’t think of the accounting angle :).

  • Joshua Maher

    MSFT just purchased users, a platform, a brand, & countless voice agreements across the world. I think the pstn access agreements are the largest benefit to the enterprise space, the brand/users are the best for the consumer space (Win7/xbox/messenger), and the platform is good as it maintains what MSFT is good at. How can this not be a good deal for MSFT? would shareholders rather MSFT spend $20b & five years building these things on their own?

    Hopefully they can learn some things about operating a service like Lync in the process.

  • Jill Heckman

    Contrary to popular belief, Microsoft does understand the consumer market. This is a brilliant move into an accelerating brand. Congratulations on the acquisition Microsoft. Google did not have the cash overseas to make a competitive bid. Skype provides a much more robust monetization path than a You Tube or a Twitter. People still want to talk and video chat with each other and now Microsoft is part of that consumer need in a big way!! The synergies are numerous and the scale is immense.

  • David Aronchick

    Just FYi, this is actually at a huge discount because these were international funds that would have been subject to taxation if they had been brought back into the US –

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