Microsoft and Skype: (2)

With a little more time, here are a few connected thoughts after yesterday’s note. And a sideline on the response from the analyst community.

It’s fair to say that opinions are many and varied about Microsoft’s acquisition. There are some along the lines of “Why would they do that?” of course – mostly from commentators who’ve looked at the multiplier between Skype’s income stream and Microsoft’s bid, or at eBay’s failure to integrate Skype into their business model. But the positive comments are broadly in three groups.

1 – the purely business commentary. Skype’s business (and remember they were on their third owner already) is in person-to-person communications. Skype was developing its IPO to go public. Microsoft are way behind in this space, losing ground to both Apple and Google (think iPhone and Android), and Cisco would also be a contender. In these terms, Microsoft’s bid is a necessary pre-emptive strike and the price reflects the potential impact to Microsoft’s business of Skype in someone else’s portfolio.

2 – the consumer space commentary. Following on from the above: Skype is a well known and widely used consumer brand; it’s a verb, like Google. Microsoft struggles here, even with Windows Live and Office 365 up and running. It has no significant presence in the realtime person-to-person space. Skype can give it that presence, and link Skype’s massive consumer base into that space. On the other side of the coin, Skype doesn’t make money; its brand image is as a free service and its income stream is via breakouts to the public phone networks and on some business-side services. Microsoft’s marketing capabilities stand a chance of creating profitable business streams there. There’s also speculation (supported by the press announcement) about developing Skype channels over Microsoft’s XBox and Kinect gaming.

3 – the enterprise user commentary. Skype is used for business but often only (as Forrester’s Ted Schadler puts it) if “IT looks the other way”. Microsoft’s business footprint could change that, either directly or through gateways to Microsoft’s existing in-enterprise Lync service. Also, Microsoft gains access to the some leading technologies which could significantly enhance its enterprise offerings.

It’s well worth reading the press release to see where Microsoft believes the link-up can lead. It’s clearly big, in their estimation, because Skype will become a business division in Microsoft.

Commentary on this announcement is developing and maturing. There’s nothing on Gartner’s blogs yet, but Forrester have pitched in with different (and sometimes contradictory) blogs from several analysts and for different sections of their readership. Horizon Watching has linked to an Economist article. The Guardian (Technology section) collects some brief comments from the senior analyst community (Gartner, Ovum and others).

Links:
• Microsoft to acquire Skype, Skype press release, 10 May 2011; also available from Microsoft Press Pass
• Ballmer’s Masterstroke In Buying Skype, Mike Galtieri, Forrester blog (for application professionals), 11 May 2011
• What Microsoft’s Skype Deal Means, Ted Schadler, Forrester blog (content and collaboration), 10 May 2011
• Microsoft Acquires Skype – What Is It Really Worth? Henry Dewing, Forrester blog (vendor strategy), 10 May 2011
• Skype-Microsoft deal: the experts’ view, Guardian Technology, 10 May 2011

Link added later: some useful commentary from Tech Republic
Does the Skype acquisition signal a new risk-taking market-making Microsoft?, Debra Littlejohn Shinder, Tech Republic, 17 May 2011

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