Microsoft to buy Skype for $8.5 billion? [update: official] | webOS Nation
 
 

Microsoft to buy Skype for $8.5 billion? [update: official] 51

by Derek Kessler Mon, 09 May 2011 10:55 pm EDT

Right now, there’s only one proper way to do Skype on webOS, and that’s by getting a Palm Pre 2 on Verizon. That particular webOS handset sports Synergy-level integration with the VoIP service, allowing users to call their Skype contacts just as if they were dialing a normal phone number. It’s genius simple, and the kind of integration we’d love to see spread across the entire webOS lineup.

That may be in jeopardy, however, with a pending purchase that came to light tonight: Microsoft is in negotiations to purchase the Luxembourg-based Skype Technologies SA for a whopping $7 billion. If you need a refresher, HP paid just $1.2 billion for Palm. Including taking on Skype’s long-term debts, Microsoft could be looking at acquisition costs of up to $8.5 billion for Skype. This comes at a time where both Google and Facebook were rumored to be considering a purchase or partnership with the internet telephony giant.

Now that Skype has been freed from its exclusivity with Verizon to become available to all carriers, including a snazzy 3G calling app for Android, we have to wonder how a Microsoft acquisition would affect its carrier and platform neutrality. Microsoft does have a mobile operating system of their own (Windows Phone 7, you may have heard of it) that they’re busy investing giant buckets of money in, and setting it up so that they have exclusivity on the product could be a big boon for the business. Then again, Microsoft has a history of competing products, including building some very nice programs for Mac OS X and iOS devices. Only time will tell.

Update: Microsoft and Skype have issued a joint press release announcing the Redmond-based software giant's acquisition of Skype for $8.5 billion cash. Press release after the break.

Microsoft to Acquire Skype

Combined companies will benefit consumers, businesses and increase market opportunity

REDMOND, WA, and LUXEMBOURG, 10 May 2011 - Microsoft Corp. (Nasdaq: MSFT) and Skype Global S.à.r.l. today announced that they have entered into a definitive agreement under which Microsoft will acquire Skype, the leading Internet communications company, for $8.5 billion in cash from the investor group led by Silver Lake. The agreement has been approved by the boards of directors of both Microsoft and Skype.

The acquisition will increase the accessibility of real-time video and voice communications, bringing benefits to both consumers and enterprise users and generating significant new business and revenue opportunities. The combination will extend Skype's world-class brand and the reach of its networked platform, while enhancing Microsoft's existing portfolio of real-time communications products and services.

With 170 million connected users and over 207 billion minutes of voice and video conversations in 2010, Skype has been a pioneer in creating rich, meaningful connections among friends, families and business colleagues globally. Microsoft has a long-standing focus and investment in real-time communications across its various platforms, including Lync (which saw 30 percent revenue growth in Q3), Outlook, Messenger, Hotmail and Xbox LIVE.

Skype will support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices, and Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities. Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms.

"Skype is a phenomenal service that is loved by millions of people around the world," said Microsoft CEO Steve Ballmer. "Together we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world."

Skype will become a new business division within Microsoft, and Skype CEO Tony Bates will assume the title of president of the Microsoft Skype Division, reporting directly to Ballmer.

"Microsoft and Skype share the vision of bringing software innovation and products to our customers," said Tony Bates. "Together, we will be able to accelerate Skype's plans to extend our global community and introduce new ways for everyone to communicate and collaborate," Bates said.

"Tony Bates has a great track record as a leader and will strengthen the Microsoft management team. I'm looking forward to Skype's talented global workforce bringing its insights, ideas and experience to Microsoft," Ballmer said.

Speaking on behalf of the investor group that sold Skype to Microsoft, Egon Durban, managing director of Silver Lake, said: "We are thrilled with Skype's transformation during the period of our ownership and grateful for the extraordinary commitment of its management team and employees. We are excited about Skype's long-term future with Microsoft, as it is poised to become one of the world's most dynamic and comprehensive communications platforms."

Founded in 2003, Skype was acquired by eBay in September 2005, and then acquired by an investment group led by Silver Lake in November 2009. Skype has made impressive progress over the past 18 months under Silver Lake's leadership, increasing monthly calling minutes by 150 percent, developing new revenue streams and strategic partnerships, acquiring the intellectual property powering its peer-to-peer network, and recruiting an outstanding senior management team.

Other members of the selling investor group led by Silver Lake include eBay International AG, CPP Investment Board, Joltid Limited in partnership with Europlay Capital Advisors; and Andreessen Horowitz.

The acquisition is subject to regulatory approvals and other customary closing conditions. The parties hope to obtain all required regulatory clearances during the course of this calendar year.

 

About Skype

Skype is communications software whose purpose is to break down barriers to communication. With an Internet-connected device, families, friends and colleagues can get together for free with messaging, voice and video. At low cost, they can also call landlines or mobiles virtually anywhere in the world. Skype has recently introduced group video, allowing groups of more than two people to do things together whenever they're apart.

Founded in 2003 and based in Luxembourg. Skype can be downloaded onto computers, mobile phones and other connected devices for free.

 

About Microsoft

Founded in 1975, Microsoft (Nasdaq "MSFT") is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

 

Forward-Looking Statements

Statements in this release that are "forward-looking statements" are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:

  • Execution and competitive risks in transitioning to cloud-based computing;
  • Challenges to Microsoft's business model;
  • Intense competition in all of Microsoft's markets;
  • Microsoft's continued ability to protect its intellectual property rights;
  • Claims that Microsoft has infringed the intellectual property rights of others;
  • The possibility of unauthorized disclosure of significant portions of Microsoft's source code;
  • Actual or perceived security vulnerabilities in Microsoft products that could reduce revenue or lead to liability;
  • Improper disclosure of personal data could result in liability and harm to Microsoft's reputation;
  • Outages and disruptions of services provided to customers directly or through third parties if Microsoft fails to maintain an adequate operations infrastructure;
  • Government litigation and regulation affecting how Microsoft designs and markets its products;
  • Microsoft's ability to attract and retain talented employees;
  • Delays in product development and related product release schedules;
  • Significant business investments that may not gain customer acceptance and produce offsetting increases in revenue;
  • Unfavorable changes in general economic conditions, disruption of our partner networks or sales channels, or the availability of credit that affect demand for Microsoft's products and services or the value of our investment portfolio;
  • Adverse results in legal disputes;
  • Unanticipated tax liabilities;
  • Quality or supply problems in Microsoft's consumer hardware or other vertically integrated hardware and software products;
  • Impairment of goodwill or amortizable intangible assets causing a charge to earnings;
  • Exposure to increased economic and regulatory uncertainties from operating a global business;
  • Geopolitical conditions, natural disaster, cyberattack or other catastrophic events disrupting Microsoft's business; and
  • Acquisitions and joint ventures that adversely affect the business.

For further information regarding risks and uncertainties associated with Microsoft's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of Microsoft's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft's Investor Relations department at (800) 285-7772 or at Microsoft's Investor Relations website at www.microsoft.com/investor.

All information in this release is as of 28 April 2011. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.

Source: Microsoft, Skype

Source: Wall Street Journal; Via: TiPb

Category:

51 Comments

Hopefully HP and Microsoft still have a "great" relationship like Leo has said before.

...why not? Microsoft's marketing push, developer relations, and in general all things that matter when trying to push WinMo 7 are done in great way and style, this is crushing machine comparing to that joke of a "push" that Web OS is enjoying from HP. And they will wipe (actually, no, thay ARE wiping) the floor with the feeble amateurish (by comparison) joke of an "effort" that HP's "global reach" and "bucket loads of cash" are doing for WebOS.

Acquiring Skype is but one of their brilliantly visible moves, that show their commitment to push hard whatever it takes to carve a piece of the cake for WinMo7 and beyond (by extension, for WinMo developers & users, that invest their money and efforts in the ecosystem). THAT is kind of commitment that HP is lacking and needs to show, badly, to convince anyone anything professional, that they ARE committed - some stupid PR farts from the manangement, often discredited to the high heaven (or rather "lowest pit of he1l"?) like Rubinstein, that will not convince anyone with his head on his neck, and not in his a$$hole.

...so, why wouldn't they stay in a great relationship, when HP is a big ca$h cow for them on other fronts (servers, desktops, laptops), and where the cutting edge technology battle is fought, HPalms are negligible to the point of being statistical deviation?

... this guy does make compelling points.

thanks man - I suppose that's why I am being thumbs-downed, and sometimes moderated out of the comments - reality bites.

You are absolutely right. My guess is that there are people at MS who are fully committed to making WP7 happen and have the resources to do it. HP seems to lack the will to make it happen and will merely "try".

Wasn't Palm acquired under the prior CEO? My guess is that no one at HP feels a gut-level ownership of WebOS, and everyone will do just enough to not get blamed by the BOD if it doesn't work out.

I think a little differently. Windows Phone 7's position in the market, despite its great UI and billion-dollar-market push, disproves the often-repeated fallacy that all you need is a "big push with lots of money" to succeed in mobile.

Windows Phone has everything that armchair quarterbacks say is necessary to win in mobile -- a big app library, lots of advertising and carrier support -- yet it's still not in the top tier.

That suggests the armchair quarterbacks are wrong about a great many things.

"WP7 (..) disproves the often-repeated fallacy that all you need is a "big push with lots of money" to succeed in mobile."

Of course marketing dollars alone are worthles, but how current trends in mobile market and specificaly WP7s position in it "disproves" it???? Being very last to the party, ditching backward compatibility with their previous WinMo systems (and pi$$ing off their established developer base in the process), being absolutely sub-standard in functionality to established competitors (and specifically to our beloved WebOS), yet getting very good reception within professional developers circles, and users mindshare, and hardware manufacturers, and cariers, and gaining steadily market share? Are you expecting them to shot straight for #1 place, after what, 8 months of system availability in the market, that sells hundreds of millions of competing devices, where some dominating competitors established years of presence?

I think that WP7 is doing great, given the above circumstances, and if HPalm was doing 1/10th of what MS is doing to beat up the interest in the system, situation would look quite differently. But they are doing NOTHING, absolutely NOTHING to encourage broad adoption, rather the opposite - they are just starting to release phones that supposedly were in the pipeline when HP bought Palm a year ago (and rightly they were, because it was a year after gen 1. WEbOs devices were released (pluses and Pre 2 does not count, they were rehash/reheated meals)). The only activity from them regarding "what is going on in WebOS land" are some PR farts and flops from higher management, displaying they are absolute clueless about what sells the devices, or outright lies and promises that are broken ("WebOS 2.0 is coming to all gen. 1 devices in 2010 - uups, it is not coming at all, etc.). They are breaking backward compatibility by introducing new, incompatible API framework. They are removing the coolest features from the system, one of the best WebOS UI differentiators - gesture area (which are diligently copied by a competition - read any PlayBook review, how "cool" & intuitive reviewers find the gesture-based UI navigation. Or for that matter, try to use for a while another OS/UI without it, how crippled it feels by comparison. Yet wise men at HP decided that "users would be confused how to use gestures". Yeah, for the first five minutes of using the device they would be - but it is your "bucketloads of cash" & marketing department task to push that as an advantage, show it up, instead of ripping it off)

Heck, community/homebrew is doing more good PR for WebOS that these lamentable "global company's with bucketloads of cash" efforts.

Unsurprisingly, WebOS market & mind share oscillates around ZERO after the year or so of that painful "transition", despite being the best thing since sliced bread - and everyone says so.

And there's clearly no personal ownership of the product inside HP - yes it was floundering when they have bought Palm, but it is dying slow and painful death from then on, regardless them releasing new devices (finally... and where's that promised big push, where's the build up prior to imminent Veer "the Weird" release???).

So I am afraid I do not understand your point. Neither I do HP's

If MS buys Skype, they won't keep it exclusive with WP.

...no they will not (they do not have to) - they'll only keep it inferior and one release behind on all other "supported platforms".

Kinda like Google Maps for WebOS. Technically, they DID released it for WebOS, didn't they?

haha yeah and its so slow that it is almost unusable... i for one use google maps quite a bit and find it very frustrating when i do want to use it to have to wait, what seems like a minute, for it to load. i was playing with my friend's evo the other day and tested the maps app on it. it open almost instantly. it is things like that that may have android win me over.

GoogleMaps for webOS was developed by *Palm*, not by Google! HP just uses the maps from Google.

(...)
EDIT: of course it was developed by Google, it took me whole 30seconds to google it out. Man, why are you posting nonsense without getting your facts first?

What's the old saying?... Can't beat 'em? Then buy 'em! ...The Microsoft Way.

I'm not sure what your angle is, but every corporation does this. Apple, MS, Google... even HP bought Palm to get webOS.

MS is too smart to not keep it exclusive. They'll make money on it -- from a range of devices and operating systems.

Microsoft is still a debt free company I believe so the 8.5 billion number is about right.

I don't think they will make it exclusive to Windows OS or the Windows Phone OS.

That is only because Microsoft recently released some good apps on iOS before it released them on its own Windows Phone 7.

Purely a defensive purchase to prevent google from getting them.

But between the two I would prefer MS to have them, both are evil, but MS is currently less evil.

Less evil you say... That's like saying killing one person is less evil then killing a million, etc.

I know next to nothing about skype other then people going crazy for it's use and that it's practically free calls. It's a shame they are gonna get bought out, having one company in the world still not bowing down to corporate money scams would have been nice.

I see no reason why this would change much for webOS - Microsoft may have their own mobile platform, but for their services they've always tried to deploy to as many platforms as possible. I would imagine that Skype would fall into that category.

its been supposedly confirmed to have gone through

http://kara.allthingsd.com/20110509/microsoft-will-announce-acquistion-o...
...

MS is only debt-free if you don't count what they owe to shareholders. Great for shareholders, but not always for Microsoft!

what do you mean? Last i check Microsoft's been debt free for a while. They've been sitting on a pile cash for many many many years.

Does that mean, if it happens we would lose to windows 7 and windows 8? esp with Nokia also with them. Man that would be sad

(..)IF it happens (..) we WOULD lose??? You are joking, surely, right?

HPalm & WebOS is going off the mobile market faster than anyone can say "stupid management disconnected from reality"

Does this mean WebOS will never see Skype?
I've been thinking of switching to Android... well because lets face it there is no webos phone Sprint users can switch to, but now this news will make me expand my search to check out the Windows 7 phones.

"Does this mean WebOS will never see Skype?"
..this is just too cute...

...well, how to explain this... without API that will allow developers to access microphone, some 2 years after OS has been released... hmmm... let's think...

Maybe it's me, but i've never had a reason to use skype. Don't get me wrong it sounds great and all. But I have fring and all on my evo and haven't once found a reason to use it. If I knew some people who used it regularly that might change my opin.

It means the race is on between HP and RIM to be the fourth-place mobile OS over the long run.

Well, these are the types of moves made when a company is serious about competing in the mobile space.

Maybe HP can snap up MySpace...I understand NewsCorp has priced it to sell...

hopefully palm is going to rush out the 3g version of skype so we can all have it!
the phone integration sometimes is awesome, sometimes bogus.
mainly, I wish incoming calls came in from the persons name consistently well, not from a 404 area code sometimes, and from the wrong persons name other times.
I also wish I didnt need data to do calls/txts, itd be nice if it could be all voice or all 3g, but..better than nothing by far!
ive successfully made/received several calls, and accepted a couple of friend reqs. Wish I could send them, and that there was an easy way to add to contacts, as well as change their name on skype (name, not username)
aaaaaaa... Back on topic!
I hope skype integration is finished, and that theres a replacement, in addition to facetime support. Actually, everything should be supported. All open stds, which should make google working easily (assuming thats mostly jabber)..

I think this purchase is funny. Skype is over-hyped for this purchase and soon to be obsolete with everyone producing phones with front cameras for video conferencing. I don't think they need Skype for the video conferencing on iOS. So, it is my guess that they don't need it on Android or WebOS.

Skype isn't just interesting because of video chatting; that's probably the least interesting thing about it. It's interesting because of cheap international calling and messaging. No idea how that figures into a mobile app, however.

Where have you been guys for the last ten years??? Skype is the hallmark of the VoIP communication: first piece of soft that configured and installed in a user-friendly way, and which was actually working out of the box after running the installer and logging in.

It is not about "cheap international calls": it is an added functionality. It is about FREE calls, to anywhere in the world.

And it is not about video chatting: it is another added feature. It is about VoIP: where you have data connection, you can have a voice connection. For free. Even hanging on the phone 24/7. Even when roaming in a foreign country, and sticking to your hotel's WiFi. Or to your customer's WiFi. Or your Starbucks'.

No need to explain that carriers do not love Skype too much for being available on their 3G data smartphones?

In my country, where people actually do count their spendings, I know several companies where Skype is a de-facto communication tool of choice. Used way more often than a deskphone - which is used rather as a backward-compatibility fallback device.

"Then again, Microsoft has a history of competing products, including building some very nice programs for Mac OS X and iOS devices. Only time will tell."

Microsoft developed Word, Excel and PowerPoint on the Mac in 80's, poured huge amounts of money into it, utterly got rid of any competition on the Mac platform, and when it had the entire business productivity market on the Mac for itself, and those programs could also run in Windows, it suddenly stopped developing new versions for the Mac, forcing any customers who wanted to keep up with functionality to move onto Windows platform. It was only some years ago when other third parties and Apple began catching up with Office functionality that Microsoft started developing Office for Mac again. Go figure...

hear, hear!

ROFL, that's some revisionist history there. The best version of Office to ship to that date was Office 98 for Macintosh, which came out while Apple was weeks from liquidation and posed no competitive threats whatsoever.

I know historical revisionists like to cast Microsoft in the "evil controlling monopolist" light, but that's really more Apple's style than Microsoft's.

If you want to run Mac OS instead of Windows or webOS instead of Windows Phone, Microsoft is okay with that, as long as their product on your OS is profitable.

Microsoft makes Office for Mac because it's a profitable line of business for them. They'll keep Skype development on other platforms for the same reason -- it's profitable.

If *Apple* had bought Skype, it would not be surprising to see all non-Apple development halted. But Microsoft is, counter to the dominant narrative, surprisingly open. They license the Exchange ActiveSync e-mail protocol to competitors, and they sell software on competitors' platforms.

I partially agree. Though Microsoft IS fierce and ruthless on the fronts they see as their strategic targets, and if they are about to survive in the hi tech, then getting as much of the Mobile segment as possible has to be one of their top priorities right now.

So I have very little doubt they will "slightly" help the chance, whenever trying to grasp as many unique selling points, as possible, especially when we are talking about such a service as Skype, with hundreds of millions active users around the world. You might notice at some stage TV adverts: "Win Phone 7, the only phone with Office, XBox & Skype integration". That is catchy.

Apple are much worse separatists, I totally agree on that one.

But Skype's value lies in the number of users. Limiting it to a certain platform limits the value of it. If MS wanted to do that, they would just push MS Video Messenger or whatever they already have.

Agreed. Microsoft is in this business to be the infrastructure technologist. They don't care what OS you're running, just that you're using their technologies (Exchange, Skype) to do it. Of course, they won't say no to additional revenue via Windows Phone, but even if WinPhone becomes a 50-million-unit-per-year business, it only represents about $500 million in licensing revenue for MS.

Did Office 98 for the Mac enjoy the same functionality as Office for Windows (no, of course not)? How many versions of Office had shipped before, in the preceding 3-4 years and how many for Windows? What was the gap in functionality? How is it that the company with the largest number of developers for the Mac (yes, Microsoft) had less software releases for the Mac than other, smaller developers?

In 1995 KPMG was the world’s largest Mac user. In that year a strategic decision was made to move away from Mac and onto Win 3.1. The biggest reason for this was the KPMG was "worried" that Office on the Mac would not be supported. That is a few years before Apple was weeks from bankruptcy. KPMG was worried not because of Apple’s financial woes (which were a few years away), but because Microsoft "encouraged" KPMG to move to Win 3.1 to be on the safe side insofar as development of the software was concerned. Yes, of course there were other reasons, such as Apple arrogance in dealing with its customer and not listening to their needs. E&Y, another very large user, followed very soon. Oh, by the way, did I tell you that Microsoft essentially provided the Office for Windows for free? Now the funny thing is that I bet Office 98 for Mac upgraders would have had to pay.... Go revise this.

By the way, we are not talking about Apple's intentions here, we are talking about Microsoft's. I know Apple can and does similar things (and so does Google), but again, we are talking about Microsoft and the implications of its purchase of Skype on WebOS.

Please God, no! I don't want to have to install more services just to run Skype, e.g. Windows Live etc. The fewer companies that have more personal data the better. I don't use Facebook or Magic Jack, but I do use GMail.

I bet M$ will start charging for the client on mobile devices other than M$ phones.

there will be new discoveries that have VoIP planted in the software that will be more powering than skype. Remember, all the great programmers that develop and created the skype software, their all gone because they didn't like where skype were heading to. I feel that MS might have made a gambling mistake with this one. But i could be wrong. But there will be one coming soon.

Skype, ebay, facebook - none of these are technological wonders that couldn't be reprogrammed by a room of bright 25 year olds in a few months.

They have a hold on the market because they were able to get the most users. More users in the network == more value.

This has more implications for Apple and Google than HP/Palm.

Microsoft will doubtlessly continue to make Skype for all the major platforms. But as it has done in the past, the best, most feature-rich and integrated experience will be on its own OSes (Windows 7 and Windows Phone).

From an Apple perspective, Facetime is dead, dead, dead. And Google Talk will have a tough road ahead unless Google extends its multimedia capabilities (including voice/video chat) to every other mobile OS out there in order to compete.

HP can continue to support both Skype (as webOS 2 on Verizon does today) and GTalk, as well as other standards like SIP... webOS can be the "bridge" across the conflicting standards. With Synergy-like integration, it could even bring together the different video chat standards into one unified view.

That might be impossible for HP to "continue to support Skype", as Skype recently cut the cord on third party application "Fring", that was around for quite a few years, and was able to connect to your Skype account and make Skype calls (and was available on multiple mobile platforms). So they might actually try to tighten the screws up & grip on their millions of users.

Although that would be simply fantastic, if they could use Synergy to integrate my Skype account right into my WebOS contact list, together with Skype chat & VoIP (VoIP!! And yes, over 3G data as well, please!!) calls.

They might tighten the screws, but if they do, they'll lose a good deal of their userbase.

Further, HP/Palm's efforts in Skype were in coordination with Verizon, who have a long-term agreement with Skype.

I think the Synergy concept has legs -- in fact, it's going to be HP's primary differentiator. If you want lots of video game apps, iOS and Android are "it." If you want to bring everything together seamlessly (and have "enough" apps), webOS will be interesting to you.

If I am running webos 2.0.01 on a pre 2, how do I get Skype to work?

It's integrated into webOS only on Verizon Pre 2 units. If you have a Verizon Pre 2, you just "add account," enter your Skype login/password, and you're up and running.

I had skype on my treo pro and it was pretty darned good. A skype call could be initiated from within my contacts, the phone would ring with skype to skype calls, plus I received notifications off missed skype calls and messages on the home screen. International calls were made using the data connection at a fraction of the cost of the cellular provider.
Skype is immensely popular globally, this is an excellent move by MS and neutralizes Google voice (most functionality is only in the US) and Facetime (effectively limited to Apple products)in one fell swoop. I use skype daily, if there is no webOS development in a year when my contract's up I could very well move to WP7.
Google voice which I use through voogle is ok but one has to use cellular minutes which makes it less cost efficient.

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