Wednesday, May 11, 2011

Microsoft purchases Skype.

Source: Microsoft

I am quite optimistic about this deal. Mainly from three different points, say

1. Kinect/Gaming strategy
2. Mobile VoIP/Windows 7 overall strategy
3. Online market/Microsoft internet strategy

In 2009 Skype became the largest long distance call company with 8% of international market share, and in 2010 the market share increased to 12%. The numbers are staggering with 54 billion minutes and close to 550 million registered users and 50+ million paid users (Of course Skype still struggling to make profits).

What Microsoft can do with Skype is to integrate with their existing products.

* Kinect became a huge hit and Microsoft will certainly integrate Skype/Video calls with Kinect platform.

* As per Pyramid reports, windows 7 will overtake Android by 2015 and skype can be a very nice addition to smart phones. Also skype is a semi-business tool for frequent travelers and I've seen some SME's & consultants even printing their skype ID on business cards. So this will make a lot of sense to have skype onboard

* We all know how MS tried to buy Yahoo couple of years back. MS wants to put their name in internet arena and skype can help that.

Also MS is sitting on piles of free cash. The amount paid is ~ 10xPE and I'd think this is the right price. They can open new areas of revenue to make it profitable. One big issue will be to reduce the call charges. Skype is no longer competitive compared to new VoIP providers. I've done some comparison here. If they can reduce the prices or offer flat rate plans in a new countries that'll bring new revenue.

In Singapore or APAC I don't see a big impact of Skype on TELCO's right now but moving forward with greater access speeds Skype/Microsoft can pose a bigger threat jointly with Apple Facetime, Google Voice & other VoIP providers.

On a side note, now I'm pretty curious to see how Cisco will do with their Umi service :). If Cisco acquires Skype that would've made them instantly the market leader of VoIP market and they could've integrated Skype Video with their Umi box. But MS did the right thing now.

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