RIP Skype

[Tonitrus]

Microsoft nears Skype deal
Microsoft is nearing a deal to buy Skype, an Internet phone company, for $7 billion to $8 billion, according to a report online Monday night...

By Sharon Pian Chan
Seattle Times technology reporter

Microsoft is nearing a deal to buy Skype, an Internet phone company, for $7 billion to $8 billion, according to a report online Monday night in The Wall Street Journal.

The report, citing unidentified sources, said a deal could be announced Tuesday.

Microsoft declined to comment.

Speculation about a possible deal stirred earlier in the day Monday on various technology blogs.

An agreement to acquire Skype, one of the more recognizable brands on the Internet, would come at a time Microsoft struggles to gain more traction in the consumer market, where rivals, notably Google and Apple, have grabbed increasing attention and market share.

At $8 billion, Skype would be Microsoft's largest acquisition. Four years ago, it bought aQuantive, a Seattle online advertising company, for $6 billion.

Skype is an online phone and video-calling service for PCs and other Internet-connected devices. It says an average 124 million people use the service monthly.

For many users, Skype is replacing both landline and mobile phones because local and even international calls are cheap or free. It also makes an iPhone app for placing video calls.

Microsoft makes unified communication software called Lync, which is designed to replace traditional phone systems for businesses.

The software handles phone calls, instant messaging, conference phone calls and video conferencing.

Luxembourg-based Skype was started in 2003 by Niklas Zennstrom and Janus Friis, developers of Kazaa, a sometimes controversial file-sharing technology that enabled users to share songs through the Internet.

In 2005, eBay purchased Skype for $2.6 billion and stock.

But the auction site two years later took a $1.4 billion charge on the investment and sold a 70 percent stake to a consortium of technology investors, including Silver Lake Partners, Index Ventures and Andreessen Horowitz.

[Grey Fox]

Everyone made good return on investment in that venture, eh.

[Lucidor]

Bought it to shut it down?

[derspiess]

This is a good thing.  My in-laws always want to use Skype to video chat, while it's easier for me just to fire up the Xbox & launch Video Kinect. 

[Caliga]

  Seems like a dumb move on Microsoft's part.  I shall go mock my brother now (who owns a bunch of MSFT).

[garbon]

Seems like a dumb move on Microsoft's part.  I shall go mock my brother now (who owns a bunch of MSFT).

Acquiring the competition?

[derspiess]

Seems like a dumb move on Microsoft's part.  I shall go mock my brother now (who owns a bunch of MSFT).

Acquiring the competition?

I'm guessing he means paying too much.  They're paying a lot more than ebay did for it, but then again it makes a lot more sense for MSFT to own Skype than it did for ebay.

[MadImmortalMan]

Seems like a dumb move on Microsoft's part.  I shall go mock my brother now (who owns a bunch of MSFT).

You should have been mocking him a long time ago for owning that dog stock. I refuse to buy it until Ballmer is gone.

[Caliga]

Oh, don't worry... I mocked him when he first bought it.

[OttoVonBismarck]

Because of the nature of their business technology companies are one of the (if not the) most prone-non banking companies to generate large amounts of cash. For that reason you see tech companies making big "bets" on acquisitions like that, because holding massive reserves of cash actually has little real value for a stock holder. Microsoft is not only the most profligate when it comes to doing this, it is also arguably the company that is least successful in its bets. However Apple and Google certainly have some similar purchases they've made that essentially made no sense at all. This one probably takes the cake though, $8.5bn values each of Skype's paying customers at something like $2,000. When they spend on average $40/yr on the service.

[Barrister]

Because of the nature of their business technology companies are one of the (if not the) most prone-non banking companies to generate large amounts of cash. For that reason you see tech companies making big "bets" on acquisitions like that, because holding massive reserves of cash actually has little real value for a stock holder. Microsoft is not only the most profligate when it comes to doing this, it is also arguably the company that is least successful in its bets. However Apple and Google certainly have some similar purchases they've made that essentially made no sense at all. This one probably takes the cake though, $8.5bn values each of Skype's paying customers at something like $2,000. When they spend on average $40/yr on the service.

Apple comes under a lot of criticism for NOT making large aquisitions, and instead sitting on too much cash.

[derspiess]

This one probably takes the cake though, $8.5bn values each of Skype's paying customers at something like $2,000. When they spend on average $40/yr on the service.

While I don't necessarily disagree that they overpaid, that's a shortsighted way to view Skype's value.  It's not as if only the current paying customers are ever going to bring in revenue in the future.  The currently non-paying customers could become induced into some sort of pay service or could bring in ad revenue. 

Not to mention the value of the Skype's technology & patents

[MadImmortalMan]

My favorite would be Google's repeated attempts to sell to Yahoo for like $1B back in the 90s. What a wasted opportunity that one was. 

[Josquius]

I'm more worried for RIP msn.
Some sort of merger on the cards eventually? Doesn't make sense to keep the two IM services...

[Zanza2]

Apple comes under a lot of criticism for NOT making large aquisitions, and instead sitting on too much cash.

They will start making silly acquisitions once their business starts to stagnate. It's what they all do. Just look at Microsoft...