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Skype: has Microsoft's $8.5bn spending paid off yet - and can it?

August 30, 2013 | Telepresence Options

skype microsoft announcement

Story and images by Charles Arthur / theguardian

At the time there were plenty of arguments to suggest that it could never repay Microsoft's investment. Has it?

In May 2011, when�Microsoft�announced its planned purchase of Skype for $8.5bn (�5,5bn),�I called it "a gamble unlikely to pay off".

Just over two years later, has the gamble in fact paid off - or does it show signs of doing so?

In my analysis at the time, I argued that

After paying $8.5bn for Skype, what will Microsoft end up with? In a few years, I forecast it will be this: $8.5bn less in its bank accounts, a cats-in-a-bag fight between its Office division and its Online Services division over integration of the service, little - if any - kudos from consumers, and no appreciable effect on its bottom line.

I also argued that the bad parts of the integration would be that�
� Mobile carriers would not like the threat to their voice business from data calls, nor the threat of phones that ran Skype becoming "superpeers" and affecting bandwidth

� Problems monetising it: revenues at the time - $860m for the year, losses of $7m - amounted to just $1.30 per user�per year

� Difficulties integrating it into other Microsoft products and divisions

� Strategically, it didn't fit into other Microsoft offerings for consumer or enterprise - apart from the possibility of integrating it into Office and business switchboards which use VOIP services

� Being peer-to-peer, it's inherently unreliable; not a good fit for Microsoft, which big businesses rely on

� Microsoft already had two VOIP offerings - through Xbox Live (30m accounts then) and Microsoft Messenger (260m accounts then). Crunching them all together into a single user account looked like a hellish task which wouldn't be welcomed by users

� Skype is a consumer brand, but traded on its "upstart" nature; trying to monetise it too rapidly or thoroughly would turn people off.

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