The bidding war for Skype, which reportedly included Google and Facebook, is over and Microsoft won. For a cool $8.5 billion, they will acquire the global real time communications firm. Not a bad payday for Skype’s owners.
In a recent SEC filing, given as a part of Skype’s one-time pending IPO, Skype claimed 663 million registered users and 12.8 billion billable minutes of use (out of 207 billion total MOU) across their video and voice platform. Of those 663 million users, Skype reported 145 million were active users on a monthly basis. They also reported annual ARPU of $97 for revenue providing members.
That’s a pretty big new market segment for Microsoft to leverage. Integrating real time video and voice service into some of Microsoft’s products, including the Kinect and Xbox, have interesting implications, not to mention the possibilities for unified business and enterprise communications.
“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.”
For example, Xbox Live users in multiple different locations, who could already communicate via voice, may now be able to connect via video conference. Skype also may give Windows Phone 7, Microsoft’s mobile OS, a boost to better compete with Android and Apple’s iOS. Microsoft just became a much bigger player in the communications space.
What I also find interesting is the valuation of the deal – $8.5 billion in cash, Microsoft’s largest acquisition in terms of deal value. For that sum, Microsoft gains a company that generated approximately $860 million in total revenue and a net loss of $7 million in 2010 (according to Skype SEC filings). Skype’s owners and investors have to be quite happy.
Just goes to show you that web 2.0 valuations continue to have less to do with financials, and more to do with reach, community, and potential – at least from the buyer’s point of view. I’m sure they will get their fair share of skeptics, not only on the valuation, but on Microsoft’s ability to integrate Skype into their bureaucracy and profit from it.
Is it just me, or are these big companies working with monopoly money? Didn't ebay buy skype for a billion multiple? How'd that work out?
I understand your point. But my understanding of the deal is that eBay will get $2.55 billion for their remaining stake. Add that to the $1.9 billion they made when they first sold Skype, and their total cash out for Skype is somewhere in the neighborhood of $4.45 billion, on an original $2.6 billion purchase of Skype back in 2005. So they made about $1.5 billion over time. Not a killing for a company like eBay, but definitely more than monopoly money 🙂
Anyone see "Windows Phone 7" being rebranded as "Skype OS" to compete with Android and iOS? Big embedded base of users with which to monopolize on the brand.
And while there is some today, I see further integration with Office and their cloud concept. Heck- why does a business need a PBX and those pesky phone lines (or expensive PRI) when you can use Office, powered by Skype? Add to this IMS-like capabilities between the handset and computer and I think MSFT has made a smart move. Unfortunately an author from another article is probably correct in that if MSFT gets this right, it will only accelerate the decline of the PSTN.
Good analysis Kevin. I'd be surprised to see Skype OS though, for fear that it may impede the welcoming of Skype clients by Android and Apple for their mobile platforms.
That being said – I saw an interesting Tweet on this that said, the only people happier than skype investors today, are skype competitors. The implication being that MS will screw up Skype.
The article said they have 12.8 billion billable minutes, were not all those minutes on somebody's last mile connection that are not getting any revinue for that ? No wonder they can pay billions for it
Skype is great. Great buy for MS
I hope Skype’s quality doesn’t drop with Microsoft in it and only becomes more effective. Systems like skype are quite sensitive. Skype really deserves something because it makes the communication so easier. There is no match for skype at the moment in the electronic communications industry.
The price is low though I think. As compared to facebook which they price at $25 Billions, skype has more utility but it’s price is low!
Am I the only person who thinks Skype should have continued to go it alone, and at some point, go for its own IPO? Heck, if LinkedIn's IPO could double in a day, what would Skype do!
From the commentary and news that I have read about its plans for Skype, I don't think Microsoft gets it. I bet MSFT tries to convert Skype into a Microsoft-proprietary platform that uses an IIS/Silverlight infrastructure and only works fully with Windows (PC, phone, et al). Soon, Skype could find itself in the same position as the Flip video camera. Microsoft will sell, and Skype will finally IPO.
Or not – each time someone buys Skype, the Skype people are rewarded handsomely. Maybe their strategy is to have MULTIPLE exit strategies!