Microsoft-Acquisition of Skype

Posted in Marketing & Strategy Articles, Total Reads: 4294 , Published on 13 May 2011

In May 2011, Microsoft bought Skype in its one of the biggest deals ever(at 8.5b$). Microsoft aims to leverage Skype’s dominant user base to become commanding player in the emerging markets of video content and online telephony. But the main question which is lingering on everybody’s mind is that whether marriage between Microsoft and Skype will be successful as the previous acquisition of Skype by eBay resulted in $1.4 billion write down. 

Microsoft and Skype ?

Of the three major cell phones players Microsoft is distant third after Apple and Google. It was one of the first to enter in but competitively fell behind Apple and Google. Microsoft can make a unique proposition for the customer by merging Skype with the phone to offer the best video conferencing phone in the business. It can leverage already 170 million Skype users to create community that will take video conferencing to the next level. Skype model is peer to peer. So any pair of cell phones can be Microsoft teleconferencing booth. As the number of phones increases with three phones, five phones, it scales to infinity. This can make Microsoft’s videoconferencing platform more distinguished and powerful. 

Now whether the deal will be successful or not will totally depend on how this mobile platform becomes more powerful and attractive to consumers & corporations.  They can really become stronger and snatch some market share from Apple, Google and blackberry. 

One of the concerns is that, even with $100 million customers using Skype per month, the company is still losing money. Last year it posted a loss of $7 million. Will Microsoft change Skype’s business model to turn it around? One option could be to grow Skype’s core business to become more profitable. Will it mean end of free Skype calls.  It should not be as we have seen how Google makes millions of dollars without us paying anything to Google. Skype can enable Microsoft to sell millions of more phones and thereby selling millions of mobile operating systems. So, free calls on Skype should continue. Another option could be to build a social network some sort of commerce based social network that is different from facebook leveraging the capabilities of the phone itself. 

Does Google or Facebook have anything to fear about Microsoft acquisition of Skype?  Currently social networking is about broadcasting. People post messages on their facebook wall or share pictures; they are broadcasted to all the friends. Microsoft can form another type of social network with the help of Skype. We can have different people sitting in different parts of the world, for example one at Sydney, another one in Shanghai and 3 more at London synchronously videoconferencing sharing notes and pictures. This forms a totally new type of social network which more focused than current social network formed by Twitter or Facebook. This should not scare Facebook or Twitter but will form a totally new landscape.

Microsoft can launch a tablet leveraging skype’s capability of videoconferencing and offer a more competitive product than Apple Ipad. So I can do powerpoint presentation using integrated Skype videoconference. So powerpoint comes integrated with Skype which ipad cannot offer. Or ipad cannot offer such type of experience which Microsoft tablet can offer. All of this can make Microsoft really strong force to reckon with. If it sell millions of Microsoft tablets with help of skype videoconferencing capabilities, then it sell millions of powerpoint licenses also.

Also Microsoft is thinking of integrating Skype with its highly successful XBOX gaming console. Image the fun you would get when you see your opponent grudge when you score a point against him. 

Time will only tell whether this acquisition will help Microsoft strengthen its position but at the outset it seems pretty good deal to revive Microsoft. 


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