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.
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.
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.
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.
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.
Microsoft revealed yesterday that the Office 2010 family of products has been released to manufacturing (RTM):
I am very excited to share some great news with you. Earlier today we reached the release-to-manufacturing (RTM) milestone for Office 2010, SharePoint 2010, Visio 2010 and Project 2010!
So when they actually be available?
Our Volume License customers with active Software Assurance (SA) on these products will be one of the first to receive the 2010 set of products. They will be able to download the products in English via the Volume Licensing Service Center starting April 27. Customers without SA will be able to purchase the new products through Volume Licensing from Microsoft partners starting May 1.
Earlier this year we announced that we will officially launch Office 2010 to our business customers on May 12 with Stephen Elop, President of Microsoft’s Business Division, delivering a keynote as part of our virtual launch. Our virtual launch will allow people from around the globe to participate in our launch by going to http://www.the2010event.com. The virtual launch site will showcase product demos, customer and partner testimonials, and interviews with product managers and executives, and we hope this will give you another great way to explore, learn, and get excited about the 2010 releases.
Office 2010 will first become available in retail stores in June in the US, and customers can pre-order Office 2010 today at the Microsoft Store to receive Office when it becomes available.
Microsoft yesterday revealed the versions and estimated US retail pricing for Office 2010 which is coming in June. Here’s a summary table:
|Version||Retail Boxed Product||Product Key Card|
|Office Home and Student||$149||$119|
|Office Home and Business||$279||$199|
|Office Professional Academic||$99||N/A|
The exact contents of each version are shown in this Microsoft document but basically Home and Student has Word, Excel, PowerPoint, and OneNote; Home and Business adds Outlook; and Professional adds Publisher and Access. As always, the academic version is available through academic resellers for use by academic faculty and students.
The Product Key Card is a new retail delivery mechanism where the consumer effectively purchases a license number that will unlock a copy of Office that has been preloaded on their new PC by the manufacturer along with the free Office Starter 2010 Edition which includes advertising supported editions of of Word and Excel. Note also that:
Ed Bott has a useful discussion of the changes compared to Office 2007 which include price decreases at the low end where Microsoft has the most competition from free Office alternatives (Starter Edition will help too) and the complete elimination of upgrade pricing. Microsoft may have been forced into the latter by the complexity of dealing with new electronic delivery mechanisms like the Product Key Card and Click-To-Run, but I am sure that the idea that a new PC simply deserves a new version of Office without fooling with an upgrade is something that their marketers would love to foster.
Microsoft has lost its appeal of the injunction in the i4i patent lawsuit that prohibited it from selling versions of Office (specifically Word) in the US that contain code with the capability of opening .XML, .DOCX or DOCM files (XML files) containing custom XML. As a result, the folks in Redmond are scrambling to comply by the required January cutoff date:
This injunction applies only to copies of Microsoft Word 2007 and Microsoft Office 2007 sold in the U.S. on or after the injunction date of January 11, 2010. Copies of these products sold before this date are not affected.
With respect to Microsoft Word 2007 and Microsoft Office 2007, we have been preparing for this possibility since the District Court issued its injunction in August 2009 and have put the wheels in motion to remove this little-used feature from these products. Therefore, we expect to have copies of Microsoft Word 2007 and Office 2007, with this feature removed, available for U.S. sale and distribution by the injunction date. In addition, the beta versions of Microsoft Word 2010 and Microsoft Office 2010, which are available now for downloading, do not contain the technology covered by the injunction.
While we are moving quickly to address the injunction issue, we are also considering our legal options, which could include a request for a rehearing by the Federal Circuit Court of Appeals en banc or a request for a writ of certiorari from the U.S. Supreme Court.
Ed Bott has more information on what specifically Microsoft is doing for its various Office distribution channels and the net is that there does not seem to be any reason for Office sales to grind to a stop in the USA.