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Summary:

Now that the word is out on the Microsoft-Skype deal, the pick-up is still leaving many scratching their heads. Others, however, are seeing some of the wisdom in the move, though it still comes down to Microsoft making the deal work, which is far from given.

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Very few people saw a Microsoft deal for Skype coming, so when Om first reported it was in the works, the idea was met with a lot of skepticism. Now that Microsoft has confirmed the deal and the price of $8.5 billion, the news is still leaving many scratching their heads. Others, however, say there is some wisdom in the move — although it still comes down to Microsoft making the deal work, which is far from a given.

Many are wondering if Microsoft can actually make good on the purchase and not botch it, something most large corporations have a habit of doing. Dave Winer, the father of RSS, expressed what a lot of people are wondering:

“Can’t imagine really using a Microsoft product again. How can they not screw it up?
Peter Bright of Ars Technica questioned the price of the deal, which comes down to more than $1,000 per registered Skype user. He said Skype, while not a well-written piece of software, could be valuable as an addition to Microsoft’s Messenger/Lync platform, though it also represents a lot of overlap with existing products. It could be integrated into Windows Phone 7, but that could make it unattractive for carriers. And he wondered how lucrative each customer will be for Microsoft.
“Ultimately, it’s hard to see how the Skype purchase is worthwhile from a technology or user access perspective. The technology isn’t good enough and the users aren’t lucrative enough or plentiful enough to justify it.”
Electronista also wondered how carriers will take to the deal should Microsoft try to integrate Skype into Windows Phone 7.
“Any deal could be potentially thorny and get resistance from much of the cell phone industry. Skype is a staple app for VoIP on iOS. Verizon was also supposed to be depending heavily on Skype for video chat on its 4G Android phones but could see support pulled if a Microsoft deal goes through. Apart from Verizon, carriers also see Skype as the easy option for an officially sanctioned VoIP calling option.”
The move to buy Skype may not be just about gaining technology or Skype’s user base of more than 600 million members. It could also be strategic, to keep the company out of the hands of competitors. That’s the assessment of Larry Dignan at ZDNet, who said Microsoft is playing an expensive game of keep away, preventing Skype from falling into the hands of Google, Cisco and Avaya.
“The only potential acquirer of Skype that wouldn’t have been a pain in Microsoft’s arse was Facebook. Given those options it only made sense that Microsoft would pay up for Skype. Skype gives Microsoft some consumer and SMB street cred. So Microsoft probably paid too much. In the end, the deal may be worth it—if only to keep Skype from the competition.”
Fred Wilson of Union Square Ventures lamented the deal, saying he was disappointed to see Skype give up on its independence. He wondered aloud if the deal suggests Skype was running into troubles growing or was losing the confidence of investors. But he found a positive take-away from the acquisition for other VoIP companies.
“‘I’m not particularly inspired by the idea that Microsoft will do something great with Skype. But I do think they are a better corporate owner than eBay. The second acquisition of Skype isn’t likely to change our daily usage of the service. But it may be an inspiration to VoIP entrepreneurs everywhere to think big and create new services that can someday be as big or bigger than Skype. And that’s a good thing.”
Ultimately, much comes down to how well Microsoft integrates Skype. But there are good business and consumer reasons for Microsoft to want Skype, said Greg Sterling of Search Engine Land, if it can integrate Skype with its enterprise products, Kinect, Windows Phone 7 and even Bing.
“It’s also quite possible that Skype revenue growth could entirely offset the losses that Microsoft continues to rack up in online services — to the tune of nearly $2 billion annually now. Like any major acquisition there will be organizational and execution challenges ahead but there is some very interesting potential across several of Microsoft’s product lines. The opportunity just comes at a very high cost.”
  1. They’ll go into super “product integration mode” for products that no consumer uses and that’ll be the end of it.

    Or it could turn into a turd like Danger and the Kin. Yep, a turd.

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  2. Dave Winer went *slightly* overboard.

    Having said that, I’m not entirely sure what Microsoft’s thinking. I figure we’ll have to wait to see how this shakes out.

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  3. Bad news for Apple users.

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  4. Unless MS has some sort of overarching evil genius plan, the vector of which no one sees coming, I can’t imagine how 8.5 billion works. Let’s try one way out there – MS buys Sprint and uses Skype as a per minute phone client that is social and can do micropayments. Yes, it is going to take something as bizarre as this and 2 chess moves ahead to make it worth the money.

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  5. I think it’s a good deal for both companies.

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