SKYPE IS NOW MS SKYPE

MICROSOFT has bet big by paying $8.5 billion for the world’s most popular Internet calling service, the Luxembourg-based Skype. It has paid almost 39 per cent more than what Skype itself says it is worth. In return, Microsoft gets a service used by 660 million people, out of which 23 million Skype each other at peak times. Indeed, Skype is a verb, as Microsoft’s chief executive Steven A. Ballmer pointed out, like Google, which he did not point out.

Besides expanding into the communication space, where Skype rules, competition from the likes of Google which were also courting Skype probably prompted Microsoft to pay a record sum for a company which has lost money in four of the past five years. However, its sales have quadrupled. Skype is by far the market leader in Internet communications, both with its free service, as well as the paid services that have a growing clientele, including in the corporate space. Microsoft would do well by integrating Skype with its Office productivity programs and the Xbox video game consoles. The well-reviewed but sparsely adopted Windows for smart phones has recently got a fillip with the Microsoft-Nokia alliance, and adding Skype to it would definitely help in making the programme attractive. About 40 per cent of Skype users call using video, and integrating such capabilities with Microsoft applications would definitely enhance their value.
All this depends on Microsoft successfully integrating its acquisition. In fact, the company’s record in this has been a bit patchy. However, given that this is the largest acquisition that Microsoft has ever made, we can surely expect the company to focus hard on making it a success. Millions of users worldwide expect that their favourite service will continue as before, providing free or cheap telephony through Internet. The tie-up with Microsoft is expected to provide more stability to the product that had experienced some outages a few years ago. Microsoft, which has bought a golden goose, should ensure that it does not get strangled in any way, so that it continues to lay its golden eggs.