Microsoft reported its first-ever quarterly loss this week, thanks to the huge writedown of its 2007 aQuantive deal. But one acquisition, Skype, is turning out to be the little engine that could for the Redmond giant, at least based on the information Microsoft is providing.

According to Microsoft’s Q4 earnings report, revenue for the Entertainment and Devices Division grew by 20 percent in the fourth quarter, or $292 million, and 8 percent for the year, “primarily reflecting the addition of Skype,” the company said. Microsoft told analysts that Skype users made 115 billion minutes of calls (voice and video) during the quarter, a 50 percent increase over the same period last year.

Skype has been expanding its footprint through partnerships such as powering video calls on Facebook.

And Skype may soon get another boost in users. As noted by TechCrunch, the company is incorporating Skype into the next version of Microsoft Office, using it to power the “presence” feature in Outlook and giving Office 365 home users 60 minutes of premium Skype credit per month.

From a financial perspective, Microsoft said revenue in its Entertainment & Devices Divison increased $292 million or 20% to $1.78 billion in the quarter ended June 30, “primarily reflecting the addition of Skype.”  On the downside, the division slipped to a $263 million loss for the quarter, thanks in part to Skype-related costs and a larger payroll.

While we know how much Skype is being used, what we don’t know is exactly how many people are using it. Skype reported those numbers publicly back when it was planning to go public — citing 145 million connected users as of the end of 2010 — but Microsoft hasn’t been disclosing user stats since buying the company.

Microsoft announced that it was acquiring Skype in May 2011, and the deal was finalized in October for $8.5 billion.

What do you think? Will Skype continue to soar inside Microsoft?

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  • Didsm

    This is great news! Unlike the lamentable aQuantive aquisition, which we did not approve but for which we apologise, this Skype acquisitiion is already paying off for the Big Mike. Just like Tellme, whose technology has been incorporated into automotive applications and into Kinect, and like Hotmail, which has been incorporated into one of the three most-used Internet gateways in the world, we see a bright future for Skype as part of the Microsoft family.

    Thank you, Microsoft, for continuing to expand our technological horizons.

  • guest

    Skype will continue to grow for a while just based on existing momentum, but I don’t think it will soar inside MS. A couple of years from now MS will have lost focus, as usual, key leaders and technologists from Skype will have left (including Bates), as usual, growth will slow due to various mistakes including a failure to innovate and keep the platform current, as usual, and someone else will begin vying for leadership of this market.

    But here’s the real question for Ballmer et al, especially in light of the recent inexcusable $6 billion aQuantive write down. At the time of the acquisition, they said that Skype would be accretive to earnings following one year inside the company. The deal closed in October. How are they tracking against that? Given the lack of visible new Skype-related initiatives and the very expensive back-end upgrade MS was forced to do in order to improve the security and reliability of its infrastructure, I don’t think there’s any way they’re going to make that.Is anybody in the media going to hold them accountable for that public commitment in real-time? Or will everyone just act surprised a few years from now when MS’s announces an $8.5 billion Skype-related charge and write “investigative” reports which conclude the acquisition was off track from the start?

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