MSFT-Skype: the interesting tidbits

By Kip Kniskern | Posted May 11, 2011 16 comments

05-10Ballmer_Bates_webYesterday, Microsoft announced that Skype had agreed to an unsolicited bid, negotiated to $8.5 billion.  The news, of course, came as quite a surprise.  Skype was slated to begin proceedings to announce an IPO (Initial Public Offering), to take the company public, although there was reported interest from both Google and Facebook. It was only last week that Om Malik on his blog GigaOm revealed that Microsoft was also interested, and then the Wall Street Journal broke the story on Monday night that a Microsoft purchase was nearly done.

So with the whirlwind of news, we wanted to gather some important tidbits together in one place, as news was coming fast and furious yesterday from all over the place.

First, a couple of quick and widely reported notes:

  • Microsoft is creating a new Skype division, with Skype CEO Tony Bates as President, reporting directly to Ballmer.  Will this mean that some of the political infighting notorious at Microsoft will be lessened, as products that would may have otherwise dragged their feet at incorporating Skype will now have to answer to Bates and Ballmer?  We certainly hope so.
  • Skype will still offer, and continue to work on, cross platform offerings.  The Android and iPhone apps won’t go away, for example
  • The deal does include Qik, which Skype bought in January
  • The situation with Rdio, the streaming music service that Skype has $6 million invested in, is a bit murkier.  Neither Microsoft nor Rdio are commenting at this time, but streaming music, either from a locker a la Amazon or Google, or Zune Pass/Rdio/Pandora/Spotify, is a hot commodity right now

And then, although there may have been interest from Google and Facebook, Microsoft required exclusive bargaining rights, meaning that once Microsoft made the offer, they were the only ones negotiating.  According to GigaOm, a Facebook partnership with Skype is still very much in play, however:

With Microsoft, it gets the best of both worlds: It gets access to Skype assets (Microsoft is an investor in Facebook) and it gets to keep Skype away from Google.

Facebook needs Skype badly. Among other things, it needs to use Skype’s peer-to-peer network to offer video and voice services to the users of Facebook Chat. If the company had to use conventional methods and offer voice and video service to its 600 million plus customers, the cost and overhead of operating the infrastructure would be prohibitive.

Facebook can also help Skype get more customers for its SkypeOut service, and it can have folks use Facebook Credits to pay for Skype minutes. Skype and Facebook are working on a joint announcement, and you can expect it shortly.

(emphasis ours)

So what about Microsoft’s offerings?  The press release specifically mentioned that Xbox, Kinect, Windows Phone, Lync, Outlook, and Xbox Live, and later Steve Ballmer also mentioned Hotmail and Messenger would connect with Skype.

What’s interesting is that much of this connection has probably been yet to be determined.  From the tweets and posts we saw yesterday from rank and file ‘Softies, they were as surprised as we were about the acquisition, and were in a bit of scramble mode to figure out what it all means.  Would have been fun to track the number of Skype installations in and around Redmond yesterday!

Softies weren’t the only ones scrambling, either.  While it remains to be seen what kind of impact Skype will have on the mobile carriers going forward, they can’t be too happy today. Skype remains a threat to mobile carriers, as it cuts into their lucrative voice services by providing similar services on far less costly data plans, or even wifi.  The mobile carriers may have been hoping that Skype would just go away, but now with the might of Microsoft behind it, that isn’t going to happen any time soon.  In fact, with pressure from Skype, as well as Google Voice and others, we may (hopefully) begin to see some changes in how mobile carriers charge for services.

We put up a poll so you can let us know what you think about the deal, it’s in our sidebar, or fire away in the comments.

Posted May 11th, 2011 at 10:53 am
Category: News
Tags: Facebook, Google, Microsoft, Skype
  • Anonymous

    I actually like Rdio being part of the deal. They should finish the investment and buy them. I heard total valuation of $17 mil and they’re already at $6mil with Skype’s investment. They could use Rdio pricing and multiplatform apps to get Zune (or Rdio if they stick with that name) everywhere at multiple price points.

    I’m not an accountant but $11 mil to expand their music platform go multiplatform at different price points plus acquire some motivated engineers… that sounds like a good deal.

  • uberlaff

    I actually like Rdio being part of the deal. They should finish the investment and buy them. I heard total valuation of $17 mil and they’re already at $6mil with Skype’s investment. They could use Rdio pricing and multiplatform apps to get Zune (or Rdio if they stick with that name) everywhere at multiple price points.

    I’m not an accountant but $11 mil to expand their music platform go multiplatform at different price points plus acquire some motivated engineers… that sounds like a good deal.

  • http://www.pbase.com/brentgv Brent

    The price tag may still be criticized, but there are a lot of Microsoft properties that will benefit from Skype integration. Plus, this gives Microsoft another hip consumer brand. A brand that looks good next to the likes of Xbox, Kinect, and Windows, . And I just think it’s smart to keep Skype away from the hands of Google. So, yeah, it’s pricey. But Microsoft can afford it. And if they adequately exploit the technologies of Skype, I think we’ll look back and see that Ballmer and Co. had a decent vision. And it makes some tasks–like launching a competitor to Apple’s FaceTime–so much simpler. So much.

    Let’s see how it all plays out! :D

    • Mario Albertico

      You hit all the same feelings I have about this; it’s pricey but a great deal of potential is there. It’s also easy to imagine a world where if Google had bought Skype, everyone would have claimed it was the “best” decision ever made because it can easily blend into Google Voice or Chrome OS.

  • http://www.pbase.com/brentgv Brent

    The price tag may still be criticized, but there are a lot of Microsoft properties that will benefit from Skype integration. Plus, this gives Microsoft another hip consumer brand. A brand that looks good next to the likes of Xbox, Kinect, and Windows, . And I just think it’s smart to keep Skype away from the hands of Google. So, yeah, it’s pricey. But Microsoft can afford it. And if they adequately exploit the technologies of Skype, I think we’ll look back and see that Ballmer and Co. had a decent vision. And it makes some tasks–like launching a competitor to Apple’s FaceTime–so much simpler. So much.

    Let’s see how it all plays out! :D

    • Mario Albertico

      You hit all the same feelings I have about this; it’s pricey but a great deal of potential is there. It’s also easy to imagine a world where if Google had bought Skype, everyone would have claimed it was the “best” decision ever made because it can easily blend into Google Voice or Chrome OS.

  • Anonymous

    A few points I think could be interesting:
    1) Skype login with a Windows Live ID (huge potential for Windows Live in terms of user numbers)
    2) Skype integration in the People Hub on Windows Phone (incl smart dialing, call Skype when online, otherwise “standard” number)
    3) Skype inetegration in Windows Live (cross platform communication issue solved at once)

  • http://questionanswerresponse.wordpress.com/ b4rtw

    A few points I think could be interesting:
    1) Skype login with a Windows Live ID (huge potential for Windows Live in terms of user numbers)
    2) Skype integration in the People Hub on Windows Phone (incl smart dialing, call Skype when online, otherwise “standard” number)
    3) Skype inetegration in Windows Live (cross platform communication issue solved at once)

  • http://www.realestateactive.com Jeff Bridges

    For sure it is pretty much easy to tell that Skype will still feature the same apps – for instance, android apps – for now. But it will be replaced by purely Microsoft products overtime. (my personal prediction)

  • http://www.legalonlinemovies.com Jeff Bridges

    For sure it is pretty much easy to tell that Skype will still feature the same apps – for instance, android apps – for now. But it will be replaced by purely Microsoft products overtime. (my personal prediction)

  • http://www.appatic.com Avatar X

    I don’t usally auto-promote myself. but since it is completely in tune in both style and subject, here it is my take on the matters around the Microsoft-Skype deal:

    http://www.appatic.com/2011/05/on-microsoftskype-deal.html

    Of the stuff that i missed to mention while writing my take was the huge win the skype deal is for windows live, if Skype gets to be ported to the Live ID sign in. And the unexpected wins with the deal because now Microsoft would get to be the owner of both QIK and Rdio!!.

  • http://www.appatic.com Avatar X

    I don’t usally auto-promote myself. but since it is completely in tune in both style and subject, here it is my take on the matters around the Microsoft-Skype deal:

    http://www.appatic.com/2011/05/on-microsoftskype-deal.html

    Of the stuff that i missed to mention while writing my take was the huge win the skype deal is for windows live, if Skype gets to be ported to the Live ID sign in. And the unexpected wins with the deal because now Microsoft would get to be the owner of both QIK and Rdio!!.

  • Anonymous

    It’s also interestng to note that Apple and Google must be fuming that they now already have a direct competitor to Apple Facetime and Google Voice sitting in the App Store and Google Market. They could remove it, but are you really ready to piss off 170 million people?

  • Super2online

    It’s also interestng to note that Apple and Google must be fuming that they now already have a direct competitor to Apple Facetime and Google Voice sitting in the App Store and Google Market. They could remove it, but are you really ready to piss off 170 million people?

  • https://parithon.startssl.com/ Anthony

    I think everybody keeps missing the business aspects of the deal. The consumer side of Skype never really made a lot of money, the business side (VoIP, virtual PBX for example) has a lot more potential, especially for offerings such as Office 365 and their E4 plan.

  • https://parithon.startssl.com/ Anthony

    I think everybody keeps missing the business aspects of the deal. The consumer side of Skype never really made a lot of money, the business side (VoIP, virtual PBX for example) has a lot more potential, especially for offerings such as Office 365 and their E4 plan.