Microsoft says Skype has more than 170 million connected users. According to a regulatory filing, Skype claims its users made 207 billion minutes of voice and video calls last year. Microsoft wants to capitalize on that loyalty, putting Skype technology into various products, hoping that it can spin Skype's users into other Microsoft products.
Paying $8.5 Billion Makes Sense
"The Skype brand is a verb," Microsoft CEO Steve Ballmer said at a press event in San Francisco this morning, several hours after the acquisition plans were announced. (And just as the keynote address at the Google I/O developer conference was about to get started just a few blocks away.)
There are plenty of questions about whether paying $8.5 billion makes sense. But for Microsoft, which at the end of the most recent quarter reported that it was sitting on $50 billion in cash, it's not really the right question. Microsoft has poured billions of dollars into businesses over the years to find new markets. Some are starting to pay off, such as its Xbox video game business. And others are still a long way away from making money, such as its online services division.
Skype Offers Potential
For Microsoft, the question is whether Skype allows it to get ahead of rivals, particularly Google and Apple, in key consumer market.m Microsoft doesn't have to turn Skype into a standalone profit center. It has businesses that can be improved by baking Skype technology into them. At least, that's the bet. Microsoft can add Skype to a portfolio of real-time communications products, that include Outlook, Messenger, Hotmail, Xbox Live and Lync. And it can add Skype into Windows Phone.