{"id":421385,"date":"2011-05-10T22:18:32","date_gmt":"2011-05-10T22:18:32","guid":{"rendered":"http:\/\/www.ghanamma.net\/2011\/05\/10\/microsoft-buys-phone-firm-skype-2\/"},"modified":"2011-05-10T22:18:32","modified_gmt":"2011-05-10T22:18:32","slug":"microsoft-buys-phone-firm-skype-2","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2011\/05\/10\/microsoft-buys-phone-firm-skype-2\/","title":{"rendered":"Microsoft buys phone firm Skype"},"content":{"rendered":"

10 May 2011<\/span> Last updated at<\/span> 18:18 ET<\/span><\/span><\/p>\n
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\"Steve<\/p>\n

Please turn on JavaScript.<\/strong> Media requires JavaScript to play.<\/p>\n<\/div><\/div>\n

Steve Ballmer (left) and Tony Bates promise “new capabilities and new features” for Skype<\/p>\n<\/div>\n

Microsoft has confirmed that it has agreed to buy internet phone service Skype.<\/strong><\/p>\n

The deal will see Microsoft pay $8.5bn (\u00a35.2bn) for Skype, making it Microsoft’s largest acquisition.<\/p>\n

Luxembourg-based Skype has 663 million global users. In August last year it announced plans for a share flotation, but this was subsequently put on hold.<\/p>\n

Internet auction house eBay bought Skype for $2.6bn in 2006, before selling 70% of it in 2009 for $2bn.<\/p>\n

This majority stake was bought by a group of investors led by private equity firms Silver Lake and Andreessen Horowit.<\/p>\n

Other major shareholders include tech-firm Joltid and the Canada Pension Plan Investment Board.<\/p>\n

Shares in Microsoft ended the day in New York down 0.5% at $25.68. In contrast, eBay – which owns a stake in Skype – saw its share price rally 2.5%.<\/p>\n

‘Defensive move’<\/span><\/p>\n

Microsoft chief executive Steve Ballmer said: “Skype is a phenomenal service that is loved by millions of people around the world.<\/p>\n

Continue reading the main story<\/a><\/p>\n

Analysis<\/h2>\n

It’s a done deal: Microsoft has bought Skype for a whopping $8.5bn.<\/p>\n

That’s a lot of cash for an eight-year-old company that’s not making a lot of money.<\/p>\n

So what’s in it for Microsoft?<\/p>\n

For starters, the firm gets well over 600 million users who make Skype the world’s largest phone company for international voice calls.<\/p>\n

More importantly, Microsoft buys into a lot of potential.<\/p>\n

Marry Skype’s software with the Xbox Kinect and an HD television set, and Microsoft can make a powerful argument for getting into millions of living rooms.<\/p>\n

Think beyond teleconferencing for the whole family: there’s one-on-one training, home schooling, even patient care delivered remotely and in vision.<\/p>\n

Smarten it up for the corporate world, and Microsoft can challenge the telepresence business of firms like Cisco and Polycom.<\/p>\n

And Skype is multi-platform, reaching into the worlds of Apple and Linux.<\/p>\n

Finally, Skype is mobile, and can be paired with Windows Phone 7.<\/p>\n

The hitch: Microsoft boss Steve Ballmer will have to work hard to integrate Skype, to ensure the voice\/video-over-the-internet company is not strangled by his firm’s notorious bureaucracy.<\/p>\n<\/div>\n

“Together we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world.”<\/p>\n

Skype will now become a new division within Microsoft, and Skype chief executive Tony Bates will continue to lead the business, reporting directly to Mr Ballmer.<\/p>\n

“It’s a strategic asset and a defensive move [for Microsoft],” said Colin Gillis, an analyst at BGC Financial.<\/p>\n

“If they can put it on Windows 8, it gives them an advantage. It helps them in the tablet market.”<\/p>\n

Other analysts say Microsoft’s aim in buying Skype is to improve its video conferencing services.<\/p>\n

Price concerns<\/span><\/p>\n

Although the price tag of $8.5bn will not stretch the US giant, some experts have questioned whether it is paying too much for a company that has struggled to turn a profit.<\/p>\n

Michael Clendenin, managing director of consulting firm RedTech Advisors, said: “If you consider [Skype] was just valued at about $2.5bn 18 months ago when a chunk was sold off, then $8.5bn seems generous.<\/p>\n

“[It] means Microsoft has a high wall to climb to prove to investors that Skype is a necessary linchpin for the company’s online and mobile strategy.”<\/p>\n

This view was echoed by Ben Woods, head of research group CCS Insight.<\/p>\n

“The big unanswered question is how do Skype assets work for Microsoft… how do you justify the price?” he said.<\/p>\n

Skype was founded in 2003.<\/p>\n

Calls to other Skype users are free, while the company charges for those made to both traditional landline phones and mobiles.<\/p>\n<\/div>\n<\/p>\n

View the original here:
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