Today, Microsoft officially announced its acquisition of Skype, dishing out a hefty $8.5 billion for the popular video conferencing service. The Skype deal will be Microsoft’s most expensive acquisition in its 36-year history. As a company that traditionally avoids pricey purchases, Microsoft must have some big plans for Skype.
A Quick Skype Background Check
Skype was created by Niklas Zennstrom and Janus Friis in 2003. Offering free video conferencing and calls between Skype users via computer and certain cell phones, Skype quickly became popular with international callers. Interestingly, Zennstrom and Friis are also the inventors of the infamous Kazaa music sharing program, a big name in the muddied waters of music piracy (Kazaa also became well known for being riddled with viruses).
Skype was bought by eBay in 2005 for $2.6 billion—a strange partnership, and the experiment was a flop. In 2009, eBay sold 70% of Skype to a technology investors group led by Silver Lake, who will now be making a very pleasant profit off of Microsoft’s purchase.
As the Wall Street Journal notes, despite Skype’s continuing popularity, it has made little profit:
Profits continue to remain elusive as the company expands its business world-wide. Last year the company posted revenue of $860 million and $264 million in operating profits, but still had a loss of $7 million. The company had $686 million in long-term debt as of Dec. 31.
Naturally, Microsoft hopes to change that.
Skype Under New Management
While some claim that Microsoft overpaid for Skype, the new addition could prove quite valuable. Microsoft, making most of its money through Windows and Office software systems, hasn’t had the easiest time breaking through to other playing fields, namely the mobile industry.
Skype could serve as a powerful catalyst and help Microsoft get a leg up through integrating Skype into the new Windows 7 phones, which will need plenty of bells and whistles to compete with Google’s Androids and Apple’s iPhones.
The Uncertain Future
Microsoft will doubtlessly be trying to utilize their new star pupil in a variety of ways.
Om Malik at Gigaom suggests that, despite not directly buying Skype, Facebook might have some serious Skype benefits ahead since Microsoft is an investor in Facebook. Think Skype integration into Facebook chat. Big possibilities.
Over at Read Write Web, Marshall Kirkpatrick shares hope that Microsoft might consider tailoring Skype for social networking purposes:
Skype really ought to be a platform for social-graph based products, services and features …there's got to be some social networking magic that a company desperate to get into social could work there.
Skype boasts more than 600 million registered users—that’s more than Facebook or Twitter, although admittedly the number of active users is much lower. But clearly the potential is there, and since social media is all the rage these days, I’d be surprised if Microsoft didn’t plan on utilizing Skype as part of a larger move towards social media.
Despite Skype’s popularity, it’s made little headway since its conception. My hope is that Microsoft will use some creativity and help Skype branch out in other directions.
There are endless possibilities. Over the past year or two, I’ve participated in several Skype job interviews—maybe Microsoft could consider a Skype “setting” tailored to such a situation, including features like resume-review.
Clearly there are some interesting options out there for Skype’s future. What do you think Microsoft has in store for our favorite blue bubble buddy?
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