Microsoft Skype acquisition gives the company a ‘foot up’ in mobility

Microsoft will acquire Internet communications company Skype for $8.5 billion in cash, the companies announced Tuesday. Microsoft will buy Skype from the investor group led by Silver Lake under a definitive agreement that has been approved by the boards of directors of both Microsoft and Skype.


Microsoft will acquire Internet communications company Skype for $8.5 billion in cash, the companies announced Tuesday. Microsoft will buy Skype from the investor group led by Silver Lake under a definitive agreement that has been approved by the boards of directors of both Microsoft and Skype.

According to the companies’ press release, this acquisition is intended to “increase the accessibility of real-time video and voice communications” and “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.”

Steve Hilton, Head of Enterprise Research at Analysys Mason, said that one of the largest benefits of the acquisition for Microsoft will be in aiding the company’s mobility play in the enterprise.

“Mobility has become a huge driver of enterprise purchasing requirements and Microsoft is still miles behind in the development and support of mobile-enabled solutions,” Hilton said. “Skype’s video platform is one of the potential uses to help Microsoft better penetrate the enterprise. I believe more video-based communications (whether room-based, desktop-based or handset-based) is a longer-term trend for enterprise communications. Microsoft having Skype in the mix gives it a foot up.”

However, Hilton does not believe the acquisition is an enterprise play. “The announcement that Microsoft will buy Skype should give UC vendors like Avaya, Mitel, Polycom, NEC and others some cause-for-pause. However, enterprises aren’t just going to jump on the Micro-Skype express,” he said. “It makes sense to Microsoft, as Microsoft has huge touch into consumer markets with gaming consoles, messaging platforms, email, and operating systems. I don’t think the enterprise applicability of Microsoft-plus-Skype was the real driving factor in this acquisition. It was more a technology play than a customer segment play.”

Hilton quoted his colleague, Stephen Sale, Principal Analyst at Analysys Mason, on the competitive advantage the Skype acquisition could potentially offer to Microsoft:

“Perhaps the most striking aspect of this acquisition is the emergence of an alternative to the vertically integrated models of Apple and Google: Nokia/Windows Phone/Skype is set to compete with Android/Google Voice and Apple/iOS/FaceTime. Operators may not welcome the news of the addition of a native OTT VoIP capability, but indications are that the new alliance may be more carrier-friendly than Apple and Google, and that a telco-grade white-label service is a strong possibility. Nokia, of course, has long-standing relationships with MNOs, Microsoft has similar relationships through its enterprise activities and its media/IPTV platforms, and Skype has moderated its youthful rebellion in favor of operator partnerships (with, for example, Hutchison 3G UK, KDDI and Verizon). In combination, the three players are less likely to make aggressive inroads into the mobile value chain. As a result, MNOs may see them as preferred partners to Apple and Google, provided the results of the partnership achieve consumer buy-in.”

“Skype is a phenomenal service that is loved by millions of people around the world,” said Microsoft CEO Steve Ballmer in a press release. “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.

Egon Durban, managing director of Silver Lake, the investor group that sold Skype to Microsoft, said in the press release: “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.”