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Microsoft Corp. (Nasdaq: “MSFT”) and Skype Global S.à r.l today announced that they have entered into a definitive agreement under which Microsoft will acquire Skype, the leading Internet communications company, for $8.5 billion in cash from the investor group led by Silver Lake. The agreement has been approved by the boards of directors of both Microsoft and Skype.
The acquisition will increase the accessibility of real-time video and voice communications, bringing benefits to both consumers and enterprise users and generating significant new business and revenue opportunities. The combination will 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.
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Skype will support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices, and Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities. Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms.
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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.
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The acquisition is subject to regulatory approvals and other customary closing conditions. The parties hope to obtain all required regulatory clearances during the course of this calendar year.
Om Malik has some perspective on why Skype’s owners were anxious for it to be sold and suggests that if Microsoft does not botch the acquisition, the big winner could be Facebook (who already has a relationship with Microsoft) and that a joint announcement could be expected shortly. Still, the big question is how the acquisition will work out, including how much of the Skype team will stay with Microsoft and the basic economics of the Skype service which has already suffered through a failed acquisition by eBay:
Despite its popularity, the service has struggled to maintain profitability. Since most of its services are free, Skype makes much of its income from a small group of users who pay for long distance calls to telephone numbers. In 2010, Skype recorded $859.8 million in revenue but reported a net loss of $7 million, according to a filing.
Microsoft’s deal-making history is mixed. The company has often been an smart acquirer of start-ups and smaller companies, analysts say, picking off technical teams that are then folded into products likes Windows, Office and Internet Explorer. But during Mr. Ballmer’s tenure as chief executive, beginning in 2000, the company has also made far larger, riskier bids, most of which have been viewed as unsuccessful.
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In 2005, eBay bought Skype for $2.6 billion with hopes of tightly integrating the service as a sales tool. But the deal never lived up to its promise and eBay took a $1.4 billion write-down on its investment.
I’m frankly a bit dubious about the success or at least profitability of this acquisition since Skype doesn’t even seem to be a side dish, but more of a garnish on Microsoft’s plate and a very expensive garnish at that.
Bob Muglia, the president of Microsoft’s Server and Tools business is out and it looks like he has been pushed:
Bob Muglia, head of servers and tools, is leaving Microsoft this summer.
In a memo to employees, Steve Ballmer says he’s conducting a search internally and externally for a replacement.
He also says, "I have decided that now is the time to put new leadership in place for STB," which makes it seem like he’s tossing Muglia.
Server and tools is Microsoft’s third biggest businesses. It generated $4 billion in revenue last quarter.
Click through for the full text of Ballmer’s memo but here’s the pertinent clip:
The best time to think about change is when you are in a position of strength, and that’s where we are today with STB – leading the server business, successful with our developer tools, and poised to lead the rapidly emerging cloud future. Bob Muglia and I have been talking about the overall business and what is needed to accelerate our growth. In this context, I have decided that now is the time to put new leadership in place for STB. This is simply recognition that all businesses go through cycles and need new and different talent to manage through those cycles. Bob has been a phenomenal partner throughout this process, and he and his leadership team have the right strategy in place.
In conjunction with this leadership change, Bob has decided to leave Microsoft this summer.
Sounds like he was definitely pushed. I have often said that Server and Tools gets no respect at Microsoft while it has built success after success in a much more competitive environment than that facing the other Microsoft cash cows of Windows (client) and Office and this is apparently just more of the same. One surely has to wonder what Ballmer is thinking since there are numerous other areas in Microsoft that could really use a shakeup. Anyhow, Muglia gets to run the operation until a new leader is found and then bring him/her onboard before departing.
Today at the 2011 Consumer Electronics Show, Microsoft announced that “the next version of Windows will support System on a Chip (SoC) architectures, including ARM-based systems from partners NVIDIA Corp., Qualcomm Inc. and Texas Instruments Inc. On the x86 architecture, Intel Corporation and AMD continue their work on low-power SoC designs that fully support Windows, including support for native x86 applications.”
To drive the point home:
Microsoft demonstrated the next version of Windows running on new SoC platforms from Intel running on x86 architecture and from NVIDIA, Qualcomm and Texas Instruments on ARM architecture. The technology demonstration included Windows client support across a range of scenarios, such as hardware-accelerated graphics and media playback, hardware-accelerated Web browsing with the latest Microsoft Internet Explorer, USB device support, printing and other features customers have come to expect from their computing experience. Microsoft Office running natively on ARM was also shown as a demonstration of the potential of Windows platform capabilities on ARM architecture.
“Windows will continue its industry-leading support across the widest possible set of devices, delivering the breadth and choice that customers demand. Intel and AMD continue to evolve and improve the x86 platforms, including new low-power systems, and advance new designs such as the recently announced 2nd Generation Intel® Core™ processor family and AMD’s Fusion accelerated processing units (APUs). NVIDIA, Qualcomm and Texas Instruments are joining Microsoft to provide ARM-based designs for the first time.
To those with long memories, Windows NT supported other processor architectures besides Intel, but that support disappeared over time due to lack of market interest. Now the situation is reversed with the mobile market compelling “light” architectures and operating systems that have the traditional Wintel players scrambling. Windows 8 is unlikely to arrive before 2012, but the real question though is whether a full-fledged Windows OS is really the right fit for the mobile market and when touch enabled apps will arrive to run on it.
Steve Ballmer has announced that Microsoft Chief Software Architect Ray Ozzie is leaving and that his post will not be filled.
With our progress in services and the cloud now full speed ahead in all aspects of our business, Ray and I are announcing today Ray’s intention to step down from his role as chief software architect. He will remain with the company as he transitions the teams and ongoing strategic projects within his organization – bringing the great innovations and great innovators he’s assembled into the groups driving our business.
Woody Leonhard at Infoworld says "Ray Ozzie’s leaving Microsoft: What took him so long?" and Joe Wilcox opines that the problem was that Ozzie really wasn’t one of Steve Ballmer’s boys. Take the money and run, Ray – there are lots of places where you can do interesting technical work.
