Update: It’s official: Microsoft adds new ‘Skype Division’ in $8.5 billion deal

Microsoft’s blockbuster agreement to acquire Skype is all but assured now, with multiple reports citing a purchase price of $8.5 billion, including assumption of debt. The deal is already raising lots of eyebrows, with New York Times columnist David Pogue’s readers turning it into a running joke on Twitter.

The skepticism is warranted. Microsoft has had a rough time with big acquisitions in the past, and Skype will be seen by many in the industry as tying its fortunes to an over-the-hill technology giant that has struggled in consumer markets.

But many of the people trying to wrap their heads around the deal are missing an important point — the more than 10 million Microsoft cameras connected to television screens in homes around the world.

That’s how many Xbox 360 Kinect sensors have been sold in six months. The devices already have video chat capabilities, but the feature has been relatively low profile. Just imagine what would happen if Microsoft brought the Skype brand — and its 145 million connected users — into the picture. That’s a powerful combination of brands with the potential to get a lot of attention and usage.

The existing video chat feature in Microsoft Kinect

Suddenly this deal seems more interesting doesn’t it?

Skype up to this point has made its move into the living room through Skype-enabled TVs and TV-compatible webcams. But a combination with Microsoft would give the Skype brand a major new inroad, while giving Kinect another killer app, rivaling Cisco and others in consumer video-conferencing.

As we’ve been noting since yesterday, other reasons for Microsoft and Skype to combine include the fact that the companies are largely complementary. Microsoft’s strength is in enterprise software and services, including its Lync communication and collaboration tools. Skype’s strength is in the consumer communications market, but it has been aspiring to establish a bigger presence in business communication. Skype integration with Microsoft’s Windows Live Messenger and Windows Phone also would be logical.

So the companies seem, on the surface, like a decent fit.

Whether or not all of this justifies the $8+ billion price tag isn’t clear. Google and Facebook were reportedly discussing $3 billion to $4 billion at one point in their talks with Skype, which suggests that Microsoft was willing to pay a premium to keep those competitors at bay.

As always, a lot will depend on how well the companies can integrate their technologies and execute their business strategy. (Combining the Skype login and Windows Live ID systems will be just one of the tests.) But looking at the bigger picture — including the prospect of Skype-enabled Kinect cameras — it starts to make more sense.

Follow-up: Microsoft banking on Skype brand, user base to justify gigantic deal

Venture capitalists upbeat about Microsoft’s massive $8.5 billion buyout of Skype

Comments

  • http://twitter.com/RedRussak Joshua ‘Red’ Russak

    I don’t know how much I can say, but I have friends working at Microsoft, secretly working on the future of true integration of internet and TV…and this would play a large role in their efforts. Wish I knew more…but you know those guys are ;)

  • Guest

    Wow! Microsoft has shown real foresight with this acquisition. One hundred forty-five million Skypists can now communicate in real-time with the over 50 million persons owning Xboxes, of whom 10 million own Kinects and the remaining 40 million own compatible headsets.

    Congratulations, Microsoft. You’ve just replaced my telephone!

    • Avatar Roku

      Kinect isn’t just for Xbox 360. Kinect works with Windows as well. And if you’ve seen some of the advanced MIT hacks done with Kinect you can see tremendous potential here for business teleconferencing. Kinect has the ability to blur out backgrounds only focus on people talking in a video, keep track of their talking time, hide individuals or objects from a scene for privacy, track the distance between objects, etc.

      http://vimeo.com/21864331

      • Pieport

        I like the video – the guy using an Apple computer! Isn’t that a pointder to the real truth behind this acquisition?

    • Genpattonjames

      Yeah, and just wait until you get the bill. Because we all know that Microsoft likes to give things away for free right?

      • http://pulse.yahoo.com/_6KNE6725GFTCYZHJZK2J4N6UVE Brett

        Why, yes they do give things away for free. I’m a Web Developer and they gave me about $5K in software for free to get me started.

        Oh, and my Xbox Live Membership costs a paltry $50 a year. Oh they’re really sticking it to me! Looking forward to using Skype with my Kinect on Xbox Live!

        Sony’s game network is free, but look what you get with that! I’ll pass on the identity theft bonus!

    • Bob

      Okay, so that generates more use and therefore more costs for MS in terms of infrastructure. But how does it make them more profit in order to justify paying $8.5B?.

  • Kasrin

    LOL!

    95 percent of the piece of junk Eye Toy(aka Kinect) units are sitting in people’s junk closets gathering dust next to their Xbox HD-DVD addons.

    This silly acquisition has nothing to do with Microsoft’s basket-case of a console, the Xbox 360.

    Congrats on having the dumbest and most asinine response to the Skype acquisition!

    • Guest

      I think you’re confused, Karen. EyeToy is the PlayStation 2 camera, of which fewer than 400,000 were sold. Kinect is the Microsoft motion controller of which more than 10,000,000 were sold in only a few months, making it the fastest-selling electronic device in history. (That’s not just me saying that, Karen. That’s the Guinness Book of Records.)

      Karen, I would love for you to listen to me more. Tune in tomorrow for my free webinar, “Consoles and You: Learning More About the Future of Entermunications.”

      • Guest


        10,000,000 were sold in only a few months”

        Oh god…

        Fanboys parroting Microsoft PR shipment numbers. No wonder the piece of garbage RRoD plagued Xbox 360 is sitting in last place this gen.

        The idiots from Microsoft’s incompetent E&D Division really needs to grasp dumping millions of extra units into the retail channel just so you can make a press release does nothing except give the dumb hardcore Xbox fanboys like this idiot something to babble about.

        • Guest

          It’s OK, Glen. I know you have problems understanding Microsoft’s success. That’s why we elect men like Steve Ballmer to run companies of substantial size, leaving lesser men to whinge on Internet.

    • BLI

      Kasrin seems to be Yet Another Conspiracy-Kicking Entity. There are lots of these.

  • Scpanza

    if msft’s reach is so important to skype’s future development , the big invoice is not warranted

  • http://www.youtube.com/dfmediainc Triny D

    Strange combo.. But ms needs it

  • Anonymous

    Should be very interesting indeed to see how that turns out. Wow.

    http://www.totally-anon.at.tc

  • http://ximagin.co/thecw/ The CW

    Who wants to sit around in their living room watching other people sitting around in their living room? The reason video phones haven’t taken off isn’t because there’s been a lack of people trying to make it happen. It’s because no one really wants to clean their living rooms.

    • Guest

      Some of my friends have bred and yielded offspring. Said friends prolifically post pictures publicly. In addition, these friends videophone their parents to show said parents their newly-spawned grandchildren.

      In conclusion, not all men are as inhibited as we are with respect to exhibiting our bodies, surroundings, and relatives to others. Microsoft Skype 2011 lets those who want to do so do so.

    • guest

      is this 1982?

    • Lloyd

      Ummm.. I do. My youngest brother lives out of state and recently had a new baby. My dad and I were able to see and chat with my brother’s family through Video Kinnect. It was nice being able to see my new nephew who is hundreds of milse away.

  • http://blog.findwell.com Kevin Lisota

    Kinect integration will certainly be interesting on the consumer side of things, but as a business owner, I can see integration with Lync being a big revenue driver.

    Right now, Microsoft owns the corporate productivity and email communications space. If I can elegantly integrate email, messaging and presence with a PBX/VoIP phone system, all from one vendor, that is a big win.

    • Bob

      Kevin,

      This is availoable today, it’s called MKicrosoft Lync 2010

  • SeattleC++

    You assume that people want to have video chat. I think we’ve proved pretty conclusively over a period of 50 years or so that video chat is a nonstarter. People just flat out don’t want anyone who calls on the phone to see into their living room, see what they’re wearing at 11 PM, etc. And they don’t want to interrupt what they’re watching on TV every time they get a phone call. It’s a dumb dream that tech companies continue to chase. When will they learn?

  • GV_User

    Everyone is focused on Video Chat… Microsoft needs something to rival Google Voice… Buying Skype gives them this… Hope they give free calling to the US like Google does…

  • Dizzy Dazzy

    I want to buy a Microsoft TV the next time (with a Samsung Auper AMOLED screen), fitted with a slot in xbox, a slot in CAM module, a slot in intenet/interactive module where is works like a PC, a TV and a video phone & entertainment center.

    Please MS… make one like that..

    Oh yeah… and there need to be many slots for harddrives so I can upgrade the storage for downloads and when I record TV programs and series..

    I would pay major $ for a device like that.

  • starlite

    So is Skype on Google or where can find free ware ?  Is it Microsoft? and virus free? 

  • Emhill92378

    So when will the app. for xbox  become available?

  • Piotr Sowa

    I create solution in C#/.NET 2.0, binary files you can find at http://piotrsowa.eu/2013/03/17/kinect-for-pc-and-skype-means-kinectcam/ it works on Kinect SDK 1.6 and on new Skype :). Do you think it is usefull?

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