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 and Nokia announced today "an alliance that is set to deliver a groundbreaking, enterprise-grade solution for mobile productivity" on Nokia phones.
Under the terms of the agreement, the two companies will begin collaborating immediately on the design, development and marketing of productivity solutions for the mobile professional, bringing Microsoft Office Mobile and Microsoft business communications, collaboration and device management software to Nokia’s Symbian devices. These solutions will be available for a broad range of Nokia smartphones starting with the company’s business-optimized range, Nokia Eseries. The two companies will also market these solutions to businesses, carriers and individuals.
This announcement builds on the existing work Nokia is doing by optimizing access to e-mail and other personal information with Exchange ActiveSync. Next year, Nokia intends to start shipping Microsoft Office Communicator Mobile on its smartphones, followed by other Office applications and related software and services in the future. These will include:
- The ability to view, edit, create and share Office documents on more devices in more places with mobile-optimized versions of Microsoft Word, Microsoft PowerPoint, Microsoft Excel and Microsoft OneNote
- Enterprise instant messaging and presence, and optimized conferencing and collaboration experience with Microsoft Office Communicator Mobile
- Mobile access to intranet and extranet portals built on Microsoft SharePoint Server
- Enterprise device management with Microsoft System Center
Nokia is the leading worldwide provider of smartphones and Microsoft’s own smartphone efforts with Windows Mobile are not sufficient for them to want to shut out Nokia business users in order to maintain an exclusive for their own products.
Last Thursday, Microsoft released Service Pack1 for Exchange Server 2007. Aside from the usual fix roll-up, there are a variety of enhancements including:
Microsoft’s Office Communications Server 2007 RTMed in July, but today was the gala launch event in San Francisco complete with an appearance by Bill Gates who also unburdened himself of an executive email to underscore the importance of the unified communications business to Microsoft. Here’s the full product menu from the press release: