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Microsoft CEO Steve Ballmer (above) told attendees at a May 10 press conference that the company is "committed to engaging and building the Skype user base," and that it will continue to build apps for non-Microsoft platforms. He emphasized that Windows Phone 7 is also part of the plan (a Skype client for the smartphone OS was previously announced and is scheduled for release this fall).
In an e-mail today to Microsoft employees (reprinted by ZDNet's Mary-Jo Foley), Ballmer wrote:
By bringing together the best of Microsoft with the best of Skype, we will drive a new era in communications. We see a huge desire to do more with video, to make it easier for people to connect from multiple devices, to move from chat to phone to video and back in a way that is easy, natural, and human. We see with Kinect the power of using the biggest screen in the house -- the living room TV screen -- as the place where people connect with friends and families. We see with Windows Phone 7 the way communication moves from personal to professional in a blink of the eye. And we know that people want more connection and richer communication, across many devices and around the world.Together, Microsoft and Skype will deliver that kind of communication and connection. In the future, Skype will support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices, and we will connect Skype users with Lync, Outlook, Xbox Live, Messenger and other communities. I want to call out the success we have had with the introduction of Lync specifically and the value of connecting that to a consumer community of Skype. And well continue to invest in and support Skype clients on non-Microsoft platforms.
Founded in 2003, Skype was initially unpopular with carriers, since its use of VoIP was aimed at saving customers minutes on their voice calling plans. But Microsoft's carrier partners may now warm to Skype, particularly if its popularization of video calling helps drive demand for 4G connectivity and more lucrative data plans.
Rumors circulated for days that Skype, having delayed its $100 million IPO, was eyeing a partnership with another tech giant. However, reports pegged either Google or Facebook as the suitor in question, with a May 4 Reuters article suggesting -- based on unnamed sources "with direct knowledge of the discussions" -- that Facebook CEO Mark Zuckerberg was "involved in internal discussions" about either a joint venture or outright acquisition.
Skype previously found itself an acquisition target in 2005, when eBay agreed to pay $2.6 billion in cash and stock for the then two-year-old company. Four years later, the auction site announced it would sell a majority of its Skype holdings to a team of private investors for $1.9 billion in cash.
By the second half of 2010, Skype boasted an average of 124 million connected users a month, and was reportedly trying to raise money for an IPO. However, that offering was delayed after the company appointed Tony Bates to the role of CEO in October.
Rising competition for a VoIP pioneer
Although Skype remains a recognizable brand worldwide -- and claims some 25 percent of the worlds international long-distance voice-calling minutes -- it faced rising competition from other VoIP services. In January, the company announced that it had entered into a definitive agreement to purchase Qik, a provider of mobile video software and services. Online reports at the time pegged the price tag at $100 million, although neither company official disclosed the terms of the deal.
While Skype will surely buttress Microsofts existing communications portfolio, some analysts arent quite so enchanted about the acquisition.
"Wall Street hated the deal when eBay bought it, and they only paid 1/4 of what Microsoft is now paying," Roger Kay, founder and president of Endpoint Technologies Associates, wrote in a May 10 email to eWEEK. "In eight years, Skype hasnt made any money, and even at the operating level, it would take three decades to pay out in cash terms alone."
Other analysts seem more upbeat.
"Skype refreshes the Microsoft customer base with 170 million early-adopter progressive users," Ray Wang, principal analyst and CEO at Constellation Research, wrote in a May 10 email to eWEEK. "Microsoft gets a social platform that accelerates its work on Lync. Microsoft will gain a VOIP platform critical for future unified communications."
The Skype acquisition also places Microsoft on yet another collision course with Google, which also offers VoIP services. In May 2010, Google purchased Global IP Solutions (GIPS), which makes software for processing high-definition audio and video over the Web, for $68.2 million. Not long afterwards, the search-engine giant rolled out a service allowing its customers to make phone calls via Gmail, and it followed up last month with the release of Google Talk, which lets users of some Android phones do voice and video chat.
"This is as much a deny as an acquire," Rob Enderle, principal analyst of the Enderle Group, told eWEEK May 10. "Microsoft does not want Google to get core capabilities."
Nicholas Kolakowski is a writer for eWEEK.
