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Wall Street Weighs In On Microsoft’s Purchase Of Skype

Why is Microsoft paying $8.5 billion for Skype when less than two years ago the VOIP service was valued at under $2 billion? Asked about that premium during a call with analysts this afternoon, Microsoft CFO Peter Klein said the company arrived at the valuation after determining both the “intrinsic value” of Skype as well as the added value of the company when it was combined with Microsoft (NSDQ: MSFT). “We think this is good for all shareholders economically,” Klein said.

But Klein, like his boss Steve Ballmer, wouldn’t say anything specific about how Microsoft will add value to Skype. Asked by one analyst why Microsoft was buying Skype rather than partnering with it, he referred vaguely to the “breadth of opportunity we saw across all pieces of the business.” And, he declined to detail any scenarios in which Skype would fit with Windows Phone 7, saying he would wait until the deal closed to explain. (Third parties are answering already).

For the most part, though, Wall Street seems to have given the deal a pass. Microsoft’s stock was down 0.62 percent today, and, most analysts, while raising eyebrows about the steep price tag, said there were enough theoreticals tie-ins that the deal could in fact be a success.

Wrote Caris & Co. analyst Sandeep Aggarwal in a report this morning: “In our view, Microsoft can leverage Skype in many ways. First, Microsoft can enhance its Communications/Lync Server 2010 for its enterprise-class customers. Second, Microsoft can also beef up its offerings for Live Meeting with Skype and further integrate Skype into Office. Third, as far as consumers are concerned, Microsoft can bring product integration and create lots of cross-selling and up-selling opportunities for Windows Live users and Skype users. Finally, Microsoft can use Skype to enhance the value pillars of its Windows Phone 7 offerings.”

2 Responses to “Wall Street Weighs In On Microsoft’s Purchase Of Skype”

  1. aureagle

    I hope Skype’s quality doesn’t drop with Microsoft in it and only becomes more effective. Systems like skype are quite sensitive. Skype really deserves something because it makes the communication so easier. There is no match for skype at the moment in the electronic communications industry.

    The price is low though I think. As compared to facebook which they price at $25 Billions, skype has more utility but it’s price is low!


  2. Kevin Horne

    Will be great to see the billions of dollars of financial “synergies” of (a) a free service and (b) an Online Division that loses over $500 MILLION in operating profit PER QUARTER…