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Microsoft about to buy Skype?

Discussion in 'Mobile Phones / Entertainment' started by mattCR, May 9, 2011.

  1. mattCR

    mattCR Well-Known Member
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    http://www.deadline.com/2011/05/wsj-microsoft-ready-to-pay-7b-for-skype/




    Microsoft's ownership of Skype would provide a unified VOIP platform that would cross all mobile media (Android/iOS/WP7/tablets..) as well as potential integration into existing platform (integration into Live/Windows/XBOXLive)


    Skype has been looking for a suitor for some time; with the leader in the clubhouse for some time thought to be Facebook. Some had viewed Google as a potential suitor.


    Honestly, Microsoft serves as a more likely fit. Skype's inclusion in the Facebook brand would have tied it directly to a platform geared at advertising and it wouldn't have spread; it would have basically tailored itself down to fit Facebook's goals. Google would have integrated this into Android and Gmail, but there weren't a lot of other places to go then that.


    IF this comes true, Microsoft has all the pieces to put this in a broad approach across numerous platforms - it would give an immediate shippable option to Nokia in WP7, and it could be integrated into everything from Office to Exchange to XBOX to Phone and so on.

    WSJ claims this is "close to a lock" which is a real surprise suitor; all the speculation really believed that Facebook was a lock to pull this off. POTENTIALLY a great buy for MS.
     
  2. mattCR

    mattCR Well-Known Member
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    Press Conference tomorrow, this is a done deal.


    http://kara.allthingsd.com/20110509/microsoft-will-announce-acquistion-of-skype-tomorrow-morning/?mod=ATD_rss



     
  3. Sam Posten

    Sam Posten Moderator
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    My take: One of the dumbest deals in the history of bad deals.


    For comparison sake: HP bought Palm for under $2b


    Liveblog:

    http://digitaldaily.allthingsd.com/20110510/live-blog-microsoft-explains-the-skype-deal/?mod=tweet
     
  4. mattCR

    mattCR Well-Known Member
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    And Palm has brought HP... what, exactly?


    HP buying Palm was dumb from the beginning. It was them trying to get into a mobile division; they wanted to capture that.. and now Palm does.. well, a series of failures.


    Whether we love or hate Skype, (and the value that keeps getting passed around is wrong,it's actually $4.5B on paper with a $4B over time.


    That having been said, I'm not sure how bad a deal this is. Skype right now has 170M registered users, with their growth base amongst paying users escalating, and over 500,000 downloads a day. To give you an idea, if the Apple Store is right, Skype accounts for 51.2 Million downloads; android downloads also count in the millions...


    Having Skype universal on all WP7, built into Windows Live Essentials, and make it part of the Xbox experience means that in one breath, MS can shoot Skype onto roughly another 45M (XBOX) to 1.1B (Windows PCs) devices.

    In other words, MS would love to say: 90% of the video conferencing traffic flows through us. Because of the platforms they have to support it,it makes for a strong fit. Now that Skype has settled all of their IP claims, the userbase they bring is pretty substantial.. Palm had nothing even remotely of that value to add to HP, who had nowhere for Palm to go. You can almost be guaranteed when the XBOX summer update hits, Skype will be part of it.
     
  5. Ted Todorov

    Ted Todorov Well-Known Member

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    It may be too early to call Microsoft buying Skype an unmitigated disaster, but I don't see how this can in any way, shape or form be good news for those of us who use it regularly. Certainly Apple needs to get off its butt and start doing something about Facetime cross-platform compatibility. They need to get it on Windows even if it means writing their own client, and they need to add voice only compatibility as well as text chat (make it into a complete iChat replacement and potential Skype replacement).


    For anyone not seeing where I'm coming from -- let me ask you what happened to Sidekick/Danger users after the acquisition by Microsoft. Or for that matter Lala users after Apple gobbled it up. Even if Microsoft doesn't destroy it outright I ask you to compare how well say MS's Remote Desktop client works on a Mac vs. the Windows version. The last time Microsoft wrote great Mac software was Word 5.1 and IE 5.1. We are talking classic Mac OS and 10~15 years ago. The chances of iOS/Mac OS X Skype not rapidly deteriorating are close to zero.


    From Ars Technica:


    This would explain how Skype works so well in spite of efforts of hostile ISPs to disrupt it (as it competes with their international/long distance telephony products) or companies to block it via firewalls/Websense it (to block unmonitored communication). If MS were to change this as Ars suggests it would greatly diminish Skype's value/popularity/utility.
     
  6. Ted Todorov

    Ted Todorov Well-Known Member

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    Quote:

    Palm had the potential (and may still) to get HP into the Tablet/Mobile space via WebOS. It was and remains a much better move than to become Yet Another Android OEM. If it comes to nothing, that's on HP -- but it was their best shot (it was also Nokia's best shot -- remember these words when they are circling the drain a few years hence).


    On the other hand, the idea that Microsoft couldn't duplicate Skype's functionality in-house for a lot less than $8.5 Billion is an absolute indictment of Microsoft and its current state of development capability.
     
  7. DaveF

    DaveF Moderator
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  8. mattCR

    mattCR Well-Known Member
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    Kinect. More then that, Skype isn't just video conference, it also does voice.


    Ted: Of course, MS could do this (and they have, with LiveMessenger which features video conferencing now). The difference is the 170M+/348M+ attached user base.


    Whether this works out well or not is a thing to see.


    As to HP/Palm: completely disagree. HP/Palm was a slightly worse deal from the get go in comparison to HP/Compaq. At least with compaq, HP bought up the user base. With Palm, you bought a dwindling userbase with an OS that HP had no direct devices for and had been working on competition against. There was absolutely no synergy there.. and so Palm languished for a very long time, and who knows where that goes now..
     
  9. Ted Todorov

    Ted Todorov Well-Known Member

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    Matt: So what were/are HP's alternatives to WebOS in the mobile space?


    So far as customer bases go where is Danger's customer base right now -- where is LaLa's? Customer bases have a way of heading to the exits in a big hurry.
     
  10. mattCR

    mattCR Well-Known Member
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    Honest answer: HP would have been smarter licensing Android. I know that sounds foolish from your point of view, but it lowers their development cost significantly... as in, to near zero. And it cuts their ongoing production cost as well. Userbases tend to move and shift for the exits quickly if the product isn't what they want - and Skype may face that. Corel found that out when they picked up wordperfect.

    But a big part of it is also based around the kind of product you have and the place you want it to go. But a big part of it is what properties you have.


    4 Years ago, Microsoft bought a 1.6% share in Facebook at $240M. The only thing they got outside of 1.6% was the right to ads outside the US, and backbone driver support. At the time, some investors called it outrageously stupid.


    Microsoft's valuation in 2007 figured Facebook as worth roughly 14.87B dollars. Give or take. And there were people who thought this was retarded. Current cap value: $85B.

    http://www.bloggerclick.com/2011/03/facebook-stock-price-valuation-reachs.html


    So, in 4 years, MS turns around 4X it's money on stock returns alone.. but the real story is their advertising link... where MS is making far more then originally valued.

    1.6% of a company is basically nothing (technically, right now based on reports, MS has somewhat more then that now), but it is enough that MS managed to land Bing, Location, and Networking contracts out of it..which has been very, very good for that side of the house. In fact, without it, Bing would probably be dead in a ditch somewhere. ( http://news.cnet.com/8301-13577_3-20019533-36.html )


    In the end, MS buys Skype for the obvious reasons:






    Now, Apple fans may jump and leave and quit Skype for refusal to give MS money. Still, as a universally available video client, with 663M registered users and as I point out above, almost 200M paying users, it's hard to see that going to "0" anytime soon.

    The buyout factor was in part for the userbase, but it was also to trumpcard the rival; there were three suitors in this the last few days - Microsoft, Facebook, Google. Google's VideoChat hasn't really gained any traction. Facebook is looking for the technology. Both wanted it because it would put them in the drivers seat.

    Getting Skype was as much a part of keeping it away from Google as anything else. If Google grabbed Skype, they would have an instant platform across all their phones and a wide userbase. It'd be difficult for anyone to catchup.


    That's the thing... you are thinking of this like "well, lots of users just quit and go somewhere else.." Yes, that's true.. on one end. But here, you're also talking about a pay service with nearly 200M users.. which means 200M virtually issued phone IDs.


    http://www.skype.com/intl/en-us/prices/pay-monthly/?intcmp=ch1-sub


    I want you to think about when ATT brokeup. Sure, you could go anywhere.. so why didn't MCI/Sprint/etc. really rise up and wipe out ATT? Because lots of people said "oh well, I'm here, why hastle with moving?"


    Whether this turns out to be a good deal or a bad one is going to be a long time to sort out.. but I think if nothing else, for MS, it's keeping this one away from it's competitors.

    It's already been said there will be an option for Kinect/XBOX. So that's a done deal. I'm sure we'll see MS offer a licensing agreement to Facebook. And from there, we'll have to see what happens for user retention. Maybe you're right and they all hate MS and quit. We'll wait and see.
     
  11. Ted Todorov

    Ted Todorov Well-Known Member

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    Quote:

    Forget about my point of view, lets look at reality:

    When it comes to profits, Apple has eaten all the Android's OEMs breakfast, lunch and dinner. Even if we look at unit growth, ignoring profitability, the only Android OEM who has benefitted from Android is HTC. Not just Apple, but even beleaguered™ RIM has outpaced all the Android OEMs in profits and all but HTC in unit growth. What do RIM and Apple have in common? Vertical integration. Their own OS, in other words. (What makes RIM beleaguered™ is that they were asleep at the switch in 2007 when they should have frantically been working on a modern BB OS).


    See today's Asymco column for the charts: http://www.asymco.com/2011/05/12/the-end-of-phone-vendor-tiers/


    Samsung is getting spanked in unit growth, and wouldn't be putting its own Bada OS on 28% of its phones (plus some small number of WP7) if Android was so good for it. Motorola is on a fast train to Chapter 7/11. Dell is absolutely nowhere. True, ZTE/Huawei have benefitted from Android...source code. They forked Android and have now become vertically integrated based on their own proprietary Android source based OSes just like Apple, RIM and HP are with their own OSes.

    If you want to make real money in the mobile business you have to be vertically integrated. It doesn't guarantee anything, but becoming an Android OEM guarantees the opposite -- thus HPs decision to go with WebOS. And costs for Android are anything but zero: all the major Android vendors have developed their own custom UI in frantic efforts to differentiate themselves as well as custom app stores and/or apps. Also they need to pay lawyers to defend patent suits from the likes of Apple, Oracle and Microsoft (or in the case of Microsoft optionally pay a royalty for every Android sold to avoid getting sued.) And god forbid they should actually lose one of those suits -- their goose is cooked.
     
  12. DaveF

    DaveF Moderator
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    Or in historical terms: HP's been an increasingly commoditized seller in Microsoft's world, seeing its margins driven ever lower as it sells exactly what everyone else sells while having no control over the market or software drivers on its hardware.


    Did HP want to repeat that with Android? Or try and take control of its destiny with webOS?
     
  13. DaveF

    DaveF Moderator
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    On the Talk Show, John Gruber (of DaringFireball) asks, "If Skype is worth $8B today, why wasn't it worth $2B 18 months ago? What's changed?" He also observed that MS was trying to pay $14B for Yahoo a year ago; Yahoo is now worth half that. And then there's their acquisition and subsequent destruction of Sidekick / Danger.


    I don't know that buying Skype, per se, is a bad decision. But there's not much commending MS's ability to make good acquisition choices nor to do anything useful with them.
     
  14. DaveF

    DaveF Moderator
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    It highlights the change in MS's place in the industry.


    http://brooksreview.net/2011/05/ballmer/


    In the 90s, MS would have built its own Skype-killer, rolled it out for free, integrated it into all its desktop and server OS's, and worked to crush Skype, make sure it was of no value to competitors, and moved everyone into its own ecosystem.
     
  15. mattCR

    mattCR Well-Known Member
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    I think there were two factors:


    (1) Despite all the "create it on your own", to the detriment of a lot of people, MS is now lawyer shy. If they did as you suggest, a reem of lawyers would come after them for anti-trust extensions on their agreement they are just now after, and assert they are using their near OS monopoly to destroy another company. The $1B investment to "build it on their own" (which, FYI, they had - MS Messenger had basically this exact function) would have been seen by them rightly or wrongly as having potential serious consequences legally they didn't want to get into.


    (2) Skype is worth much more today then 2 years ago. The difference is at the time 2 years ago, two of the founders were protesting intellectual property and there were three federal cases going about it's legality of service. That's all changed; those have been resolved. It also has 181M more users today then it did 18 months ago :)


    In response to the argument on WebOS:



    This is true.. in that RIM, Apple lead the pack with actual profits. Android so far has been a push for most, so you're right. But imagine it like this: the WebOS buy, plus R&D, plus manufacturing is a significant cost for a product that isn't moving. Android means right now you aren't making the profit margins you wish; only RIM and Apple are doing that. But it also means you avoid a multi-billiondollar commitment that you can't defend. HP has been down this road several times before (Itanium? iPaq? etc.) HP's decision to go to WebOS would only make great sense if they can say without significant cost they would have a shippable platform in volumes. Except they don't. They never had a strategy to come up with volume shipment. HP can't devote floorspace to equal RIM in licensed units, and they don't have other licensed partners. HP jumped into a market it really didn't belong in, and it's paying the price now.


    The Skype deal will prove to be one of two things: either a move of complete genious to quickly unite MS's platforms and provide them instant access into other platforms (Droid, iOS, etc.) as a competitor OR it will be a foolish investment where subscribers quit and growth stops.


    We'll have to judge in a few years. Like I said, 4 years ago, everyone thought the buy of 1.6% of facebook was a terrible investment.. didn't work out that way.


    Whether it works out or not, it still exists as news that changes the landscape.


    (meanwhile, Apple got a big chunk of money out of me this morning, as my Wife dropped her iPad2 last night, broke the digitizer/glass, and while I pled for a repair our bit of purchasing it @ Target turned into kind of a downfall and no "free" repair option existed.. so,new Ipad2 is now in her hands.. :(
     
  16. Ted Todorov

    Ted Todorov Well-Known Member

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    Wow sorry about the iPad... Not sure I understand where Target comes in -- I don't think Apple asks or cares where an item is purchased when you take it in for a repair -- they just look at the serial number to check on warranty status. But then again I buy all my stuff directly from Apple, so what do I know...


    While HP may or may not belong in the Smart Phone market they would be signing their death warrant as a PC vendor if they ignore the tablet market. As tablets increase in software/hardware capability they will replace more and more PC functions, starting at home and spreading to the workspace. By the time tablets achieve critical mass and overtake the PC, it will be far, far too late to enter the market. The time is now.


    And there they have little choice -- Microsoft keeps suicidally insisting on pushing its desktop OS for tablets, so they are not in the game. That basically left HP with a choice of WebOS, Android or developing their own from scratch. They bought Palm/WebOS for pocket change and I don't see evidence than that they are spending vastly more money on WebOS than they would on customizing Android.

    Android has another problem besides making its OEMs no money -- there is no evidence it is getting any traction in the tablet market. WebOS is simply HPs best choice from a lot of bad ones.
     
  17. mattCR

    mattCR Well-Known Member
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    It's just that we had heard (from a bird) that Apple was very good about just giving you a "free one" because it was so new.. but apparently that really is only a hint-wink at the descretion of the Apple Store. The actual policy is $269, per the warranty.. so, we paid the $269. *shrug* (Editted: in other words, I think the Apple Store probably could have done it for us, at their end, but they would have been more inclined to bend the rule and do it if we had bought there then if we didn't..)

    I'd agree on Android's tablets; every one I have played with is basically trash. I'm sorry, I grasp they are popular, but basic functionality doesn't work and there isn't enough of an upside to any of them. People don't really grasp the basic fact: the reason why people like me, who use a bit of everything, tend to like the ipad is that it basically works. There are lots of basic issues but we can work around them. Android is just a cluster of a mess of inconsistencies. It's a point to point system. It basically sucks.


    But, on the other hand, suckiness doesn't mean it doesn't dominate the market.

     
  18. DaveF

    DaveF Moderator
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    Indeed. They paid for webOS what MS should have paid for Skype, had they vision two years ago.



    All the more reason then for HP to strike out on its own with its own, excellent mobile OS.


    Also, at the time, HP said they wanted it for their core printer business; they seemed to be all but abandoning Palm's phone business and showed little interest in the tablet. If they get their value out of webOS for their printers, then anything else is simply a bonus.
     
  19. mattCR

    mattCR Well-Known Member
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    That's a good point. HP could make great use upgrading the JetDirect technology for better IP based printing and Email to Print management. If they can upgrade their services in that area, it certainly is a win.

    Someone mentioned Yahoo above.. the attempt to buy Yahoo! accounts for one of the dumbest moves ever in the industry. It was so monumentally boneheaded I still can't make sense of what ever brought that on. Yahoo had (and still does) basically nothing. It's advertising arm is near non-existent, it has no marketplan, it is trying to do exactly what Google does and failing badly.


    Microsoft has had a lot of truly incredibly boneheaded moves (Ted mentioned Danger; which is stupid considering they lost the creative talent within a year and they went to Google.. WTF?) And some very smart moves (Bungie, Facebook, Lionshead). I have no idea if Skype works as a deal or not. But it's still significant news to a lot of people.


    It's a bit like the ATT/Tmobile news. Is it good or bad? Hard to tell. At least yet. It could work out very well.. or not. But it does change the marketplace, whether we like the move or not.


    As far as WebOS to HP.. you're right, I forgot about the printer angle; that one really does make sense for them.

    I think too many of these companies are so busy focused on how to do everything they are losing what they do best at their core. Those companies, that focus on one or two basic things and do exceptionally well at it may not "rule the world" but they rarely make monumental errors.


    MS buying Yahoo would have been an error of monumental nature. Think about this: as of today, "Bing" is growing quicker then Google, and while the newest ComScore has Google (65%) then Yahoo/Bing as a virtual dead heat, the TT/Ref matrix has Bing way out ahead of Yahoo in large part because Bing's mobile client (on iPad/iOS/Android etc.) is far easier to work with then Yahoo's. Because Yahoo's is basically AWOL.

    I don't know if the Skype thing works.. I can see the angle in it; how it COULD work, but it all depends on execution.
     
  20. DaveF

    DaveF Moderator
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    JLG at Monday Note has an essay. http://www.mondaynote.com/2011/05/15/ballmer%e2%80%99s-latest-acquisition/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+monday-note+%28Monday+Note%29
     

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