Microsoft's Skype Buy Might Just Make Sense

In a flurry of late-night bill paying, your editor happened to notice that the Wall Street Journal reported Monday night that Microsoft would announce the acquisition of Skype this morning. Microsoft is splashing out somewhere in the neighborhood of $8.5 billion for the video chat service, which makes this buy the biggest in Microsoft's history.

It's probably a good one. After all, more than 600 million users know that Skype works -- it almost has Kleenex status in terms of brand recognition -- and the technology Microsoft is buying should fit in very well with the software giant's significant push into unified communications. This buy also snatches Skype away from Google, which had been sniffing around, as had Facebook, although, the WSJ says, maybe not to the extent that some pundits suggested.

Of course, this isn't Skype's first rodeo in terms of being acquired. eBay (the other reason your editor was online late last night) wrangled the company six years ago and ended up having to dump it at a loss, so Skype's history as an acquisition target is a bit speckled. Plus, $8 billion-plus is a big outlay. Last time Microsoft spent that kind of money, it bought advertising firm aQuantive in 2007 and did what, exactly, with it? Worked it into Bing or something? We're really not sure, but we're thinking that the accountants in Redmond would be hard-pressed to quantify the value of that purchase.

Still, this is the type of purchase that should be right in Microsoft's wheelhouse, whatever a wheelhouse is. What was eBay ever going to do with Skype, anyway? Were eBay users supposed to video chat with the person behind bostonsportsjerseys2003 (not a real eBay name, as far as we know) when purchasing a New England Patriots throwback jersey? Your editor will settle for decent photos and good user reviews, thanks.

On the other hand, the enterprise usefulness of Skype is obvious, and it should serve as a major component in Microsoft's ambitious (and potentially very lucrative) attempt to connect everybody all the time in every way possible, otherwise known as its unified communications effort. There are probably many more uses for Skype than just UC, but that's the one that jumps out immediately as the real dealmaker.

And as for that $8.5 billion, well, it's a lot of money, but that's about what Oracle spends on acquisitions in any given quarter (just kidding...we think -- but Oracle does buy a lot of companies). Microsoft might be smaller than Apple these days and less of a titan than it used to be, but it's still a massive company with huge sums of cash in the bank. Spending $8 billion-plus isn't even all that big of a risk for a company the size of Microsoft.

Besides, it's about time Microsoft became proactive again, fending off competitors for a prize catch and acting like the king of the software jungle it once was and really should still be. Even if this acquisition doesn't work -- and we at RCPU believe that it will -- it's at least a welcome sign of life from a company that had begun to look like the clichéd deer in the headlights. Plus, we love the angle that this is a purchase that could translate directly into profits for Microsoft's enterprise partners, who might feel a bit left out these days with the company chasing its tail trying to catch its rivals in more consumer-oriented spaces. This is good news, then, and a strong move for a company that needed a boost and went out and got it the old-fashioned way, by spending a huge sum of money to get it.

What's your take on Microsoft buying Skype? Send it to lpender@rcpmag.com. 

Posted by Lee Pender on May 10, 2011