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Skype: has Microsoft's $8.5bn spending paid off yet - and can it?
At the time there were plenty of arguments to suggest that it could never repay Microsoft's investment. Has it?
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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