NEWS Gates Key to Skype
TAKEOVER M
icrosoft’s founder, Bill Gates, has revealed that he was one of the primary drivers behind the software giants takeover of internet phone
service Skype.
Gates, revealed in an interview with the BBC that he had worked hard to garner support among other board members for the acquisition.
The $8.5bn acquisition, the largest ever by Microsoft, has received a largely warm reaction from industry analysts however
many
suggest that they may have overpaid for the loss-making free phone business.
Gates however disagrees. Speaking to the BBC he stressed the strategic importance of
the
acquisition and the evolving nature of video conferencing, “The idea of video conferencing is going to get so much better than it is today. Skype actually does get a fair bit of revenue.”
While Skype has a strong brand recognition and following amongst its 663 million registered users it has struggled to return a profit, due in the main to most of its services being offered free such as using internet connections for make calls between computers or in some internet-enabled phones. Current revenues are generated via voicemail services and phone calls to physical landlines or mobile numbers.
Skype currently has debts of around $686m, recording revenues of $859.8m for 2010, a loss of $7m. Analysts widely agree that there remained few signs that
12 entrepreneurcountry
revenues were expected to change in 2011 however the latest deal with Microsoft is likely to redefine the service. Gates himself says that, “it’ll be fascinating to see how the brilliant ideas out of Microsoft research, coming together with Skype, what they can make of that.”
There is little doubting the strategic importance of the deal but analysts question whether it could ever be worth the price paid. Skype was bought by eBay for $2.6bn in 2005 but the internet auction site struggled to develop the and wrote down Skype’s
value by
$1.4bn, before selling a 70% stake in the company in 2007.
Microsoft’ s acquisition, whilst likely to always to be questioned for
the
price paid, is a positive sign of its intention to reassert a grip on the market after period of consolidation. The strategic importance
of the deal cannot be overstated and one wanders how long it would have been before a Facebook or Google (who looked at acquiring Sykpe in 2005) made there own moves.
Where the real value lies for Microsoft is the potential synchronization of Microsoft
Skype services with existing offerings, including its own voice-over-
internet service Lync and how Gates vision of global video conferencing platforms will take shape in the era of the digital office.
It is certainly hard to disagree with the Microsoft chiefs passionate belief that this is, “a great, great deal for Skype. I think it’s a great deal for Microsoft.”
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