News for May 2011

[U] Is Microsoft paying $13 for each Skype user?

The Wall Street Journal reported earlier tonight that Microsoft–in what would be its most aggressive acquisition in the digital space–was zeroing in on buying Skype for $8.5 billion all in with an assumption of the Luxembourg-based company’s debt.

Sources told BoomTown tonight that the deal for the online telephony and video communications giant is actually done and will be announced early tomorrow morning.

The purchase–which has been spearheaded in closely held negotiations by Microsoft CEO Steve Ballmer, with an assist from top dealmaker Charles Songhurst–is a bold move for the software giant and its biggest acquisition in more than three decades.

This deal is utter madness. Microsoft’s only option to make this deal work is to monetize Skype (and its other VOIP services) in ways that Skype itself already knows will only lead to alienation of its users, and a mass exodus from the service. Despite all the reliable sources confirming this story, I still find it hard to believe that even Ballmer is this dumb, or this desperate.

Apple, with their strong presence in mobile and Facetime, must be turning backflips right now. Not to mention the other existing VOIP companies out there (who have always had Skype as their main competitor), including Google.

The big price will give Microsoft–which has struggled in its online efforts and has lost billions of dollars for its work–a big brand name on the Web.

With Skype, which has been aggressively expanding, Microsoft will continue to lose money in its Internet efforts. Skype lost $7 million on revenue of $860 million. Operating profits, which Skype preferred to highlight, were $264 million.

And–let us not forget–Skype’s debt is $686 million. Silver lining: That’s slightly less than Microsoft’s Online Services division losses in its most recent quarter!

But, sources said, the concept is bigger than just money, including getting access to Skype’s 663 million registered users.

From All Things D

Are we really expected to believe that Microsoft is paying $13 per registered Skype user, and assuming all the companies debts to boot?

Good luck with that. Skype is simply going to disappear, along with a huge chunk of Microsoft’s remaining cash hoard and credibility.

The only good thing to come from this is that Ballmer will finally be ousted from the company.

UPDATE : Bloomberg are reporting that Skype only has around 170 million active users. Which would mean that Microsoft could be paying around $52 for each of them!

Posted: May 10th, 2011
Categories: Microsoft, News
Tags: , , ,
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