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Analysis: Microsoft buys Skype

Industry flummoxed as Microsoft splashes out $8 billion on barely profitable VoIP provider

Skype
Video calling could be one of the main reasons Skype's been snapped up by Microsoft.

In a move that has surprised the tech industry, Microsoft has splashed out $8.5 billion (about £5.2 billion) on Skype. It’s a curious move that seems to fall precisely half-way between savvy and crazy. On one hand, Microsoft’s partnership with Nokia in the smartphone space could heavily integrate Skype, providing a high-profile competitor to Google Voice and Apple's FaceTime that Microsoft owns and controls. On the other, there are arguments that this is another case of Microsoft firing wildly and snapping up a popular technology, without any real consideration regarding its profitability.

For The Guardian, Charles Arthur argues that the move will do little to Microsoft’s share price, but will anger mobile carriers (whose support Microsoft needs to have a any chance of success in the smartphone market) and worry anyone currently heavily invested in Skype, in case Microsoft goes all proprietary. He also argues that it’s tough to integrate and monetise, something Marco Arment concurred with on Twitter, commenting: “It's hard to make much money when the primary reason you appeal to people is that you give them something expensive for free.”

There’s also the question of branding. It’s telling that rather than being concerned about Microsoft derailing Skype and welding it only to Windows-branded devices, most of the reaction online has been quips about how the company might rebrand the service (such as Jonathan Abrams saying “Skype to be renamed Microsoft Windows Live Hotmail MSN Video Chat Bing”). But dismissing the buy-out with quips draws attention from the enormity of the deal: this is Microsoft’s biggest acquisition, and Skype is a giant in online communications, with a new multi-user voice-chat facility. Perhaps Microsoft’s noticed Apple pushing FaceTime and hedging its bets that carriers will soon be further marginalised, and thereby decided to buy in a company with technology that it could also merge into Office, further boosting its clout in the enterprise. But there’s also the online space, and .net columnist Gary Marshall speculates that the company might attempt to tie Skype into Facebook, which could turn a seemingly bonkers, risky and expensive investment into one of the smartest Microsoft has ever made.

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