At first, rumor had it that Facebook and Google were both looking to acquire Skype.

By Paula Bernier May 10, 2011

At first, rumor had it that Facebook and Google were both looking to acquire Skype.

A recent Reuters article talked of a potential Skype acquisition in the $3 billion to $4 billion range by one of these communications giants, and it indicated such a deal would help explain why Skype has postponed its initial public offering.

But, as it turned out, it was actually good old Microsoft that got its hands on the IP conferencing pioneer. Today, Microsoft announced its intentions to buy Skype for $8.5 billion in cash.

“Skype is a phenomenal service that is loved by millions of people around the world,” said Microsoft CEO Steve Ballmer in announcing the deal. “Together we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world.”

Established in 2003, Skype currently is owned by an investor group led by Silver Lake and includes eBay Inc., Joltid Ltd., and Skype founders Niklas Zennström and Janus Friis, the Canada Pension Plan Investment Board and Andreessen Horowitz. This group bought Skype in November 2009 from eBay, which had purchased Skype back in September of 2005.

As of last year, Skype had 170 million connected users and handled more than 207 billion minutes of voice and video conversations, according to Microsoft. The software behemoth also noted its continuing interest in real-time communications, pointing to its Hotmail, Lync, Messenger, Outlook and Xbox LIVE products. And it said that Lync experienced 30 percent revenue growth in the third quarter.

The plan is for Skype to support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices, and Microsoft to connect Skype users with Lync, Outlook, Xbox Live and other communities.

Industry analyst Jeff Kagan says: “This will put Microsoft back in the game on the larger playing field against newer and faster growing companies like Google and Apple who have also expanded into the telephony business with their wireless Android and iPhone.”

Meanwhile, TMC’s own Rich Tehrani notes that back in 1997 when Technology Marketing Corp. decided to launch INTERNET TELEPHONY magazine, “the nascent market had VocalTec, a software manufacturer charging around $50 for their software, and Microsoft with their NetMeeting software which was free.

“Overnight, Microsoft took over the VoIP client market and became the reference software for H.323 calls - a standard which is rapidly losing out to SIP for most applications,” Tehrani adds.

But, as Tehrani continues, NetMeeting was not user friendly and Microsoft quickly lost interest and reallocated telecom developers to its Internet strategy. A similar scenario played out relative to Microsoft’s wireless phone efforts, he says. So, ironically, says Tehrani, Microsoft is now pouring billions to get into a market it willingly exited years before.




Edited by Rich Steeves

Executive Editor, IP Communications Magazines

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