Why Microsoft Is Buying Skype for $8.5 Billion
Updated at 12 midnight. Microsoft has bought Skype for $8.5 billion, in an all-cash deal. The deal closed a few hours ago. The announcement is likely to come out later today or tomorrow morning, according to several reports. Steve Ballmer, CEO of Microsoft, is said to be a big champion of the deal, the largest in the history of the company. Ballmer and Skype CEO Tony Bates will host a press conference in a few hours.
Skype has been up for sale for some time, thanks to some very antsy investors. My sources indicated both eBay and Silver Lake Partners have been getting nervous about the delayed initial public offering and have been pushing for a sale of Skype. Facebook and Google were said to be earlier dance partners for Skype, and Microsoft was a late entrant and is now close to walking away with the prize.
It won’t surprise me if Microsoft comes in for major heat on this decision to buy Skype — and the software company could always botch this purchase, as it often does when it buys a company. The Skype team is also full of hired guns who are likely to move on to the next opportunity rather than dealing with the famed Microsoft bureaucracy.
I also don’t believe Facebook and Google were serious buyers. Google, with its Google Voice offering, doesn’t really need Skype. In essence, I feel Microsoft was bidding against itself. Even then, I personally think this is a bet worth taking, especially for a company that has been left out in the cold for so long.
- Skype gives Microsoft a boost in the enterprise collaboration market, thanks to Skype’s voice, video and sharing capabilities, especially when competing with Cisco and Google.
- It gives Microsoft a working relationship with carriers, many of them looking to partner with Skype as they start to transition to LTE-based networks.
- It would give them a must-have application/service that can help with the adoption of the future versions of Windows Mobile operating system.
- However, the biggest reason for Microsoft to buy Skype is Windows Phone 7 (Mobile OS) and Nokia. The software giant needs a competitive offering to Google Voice and Apple’s emerging communication platform, Facetime.
Guess Who’s the Big Winner
The biggest winner of this deal could actually be Facebook. The Palo Alto, Calif.-based social networking giant had little or no chance of buying Skype. Had it been public, it would have been a different story. With Microsoft, it gets the best of both worlds: It gets access to Skype assets (Microsoft is an investor in Facebook) and it gets to keep Skype away from Google.Facebook needs Skype badly. Among other things, it needs to use Skype’s peer-to-peer network to offer video and voice services to the users of Facebook Chat. If the company had to use conventional methods and offer voice and video service to its 600 million plus customers, the cost and overhead of operating the infrastructure would be prohibitive.
Facebook can also help Skype get more customers for its SkypeOut service, and it can have folks use Facebook Credits to pay for Skype minutes. Skype and Facebook are working on a joint announcement, and you can expect it shortly.
Why Did Skype Want To Sell?
Skype had filed for an IPO, was going to do about a billion dollars in revenues, and was on its way to becoming profitable. So why sell? Silver Lake and eBay were both getting impatient and wanted to lock in their profits. Some sources also believe Skype’s revenues had stalled.The company had bet heavily on is video sharing service. The premium version of video calling and sharing was a way for Skype to increase its average revenue per user and move into the enterprise market. However, given Skype’s DNA is that of a consumer Internet company, the challenges aren’t a surprise.
So Who Made What?
- Using the $8.5 billion price as the likely sale price, eBay gets $2.55 billion for its 30-percent stake in Skype. So in the end, eBay did make money on the Skype deal. The Skype Founders
- Niklas Zennström and Janus Friis, the co-founders, with their 14-percent stake, take home about $1.19 billion. Damn, these guys know how to double-dip!
- Silver Lake, Andreessen Horowitz and the Canada Pension Plan Investment Board (CPPIB) own 56 percent of the company, and that stake is worth $4.76 billion.
- Andreessen Horowitz had three percent of the deal and made $205 million profit on their $50 million initial investment.
- A 2011 NewNet Forecast
- Putting Big Data to Work: Opportunities for Enterprises
- A 2011 Connected Consumer Forecast
REDMOND, Wash., and LUXEMBOURG – May 10, 2011 – Microsoft Corp. (Nasdaq: “MSFT”) and Skype Global S.à r.l today announced that they have entered into a definitive agreement under which Microsoft will acquire Skype, the leading Internet communications company, for $8.5 billion in cash from the investor group led by Silver Lake. The agreement has been approved by the boards of directors of both Microsoft and Skype.
The acquisition will increase the accessibility of real-time video and voice communications, bringing benefits to both consumers and enterprise users and generating significant new business and revenue opportunities. The combination will extend Skype’s world-class brand and the reach of its networked platform, while enhancing Microsoft’s existing portfolio of real-time communications products and services.
With 170 million connected users and over 207 billion minutes of voice and video conversations in 2010, Skype has been a pioneer in creating rich, meaningful connections among friends, families and business colleagues globally. Microsoft has a long-standing focus and investment in real-time communications across its various platforms, including Lync (which saw 30 percent revenue growth in Q3), Outlook, Messenger, Hotmail and Xbox LIVE.
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. Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms.
“Skype is a phenomenal service that is loved by millions of people around the world,” said Microsoft CEO Steve Ballmer. “Together we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world.”
Skype will become a new business division within Microsoft, and Skype CEO Tony Bates will assume the title of president of the Microsoft Skype Division, reporting directly to Ballmer.
“Microsoft and Skype share the vision of bringing software innovation and products to our customers,” said Tony Bates. “Together, we will be able to accelerate Skype's plans to extend our global community and introduce new ways for everyone to communicate and collaborate,” Bates said.
“Tony Bates has a great track record as a leader and will strengthen the Microsoft management team. I’m looking forward to Skype’s talented global workforce bringing its insights, ideas and experience to Microsoft,” Ballmer said.
Speaking on behalf of the investor group that sold Skype to Microsoft, Egon Durban, managing director of Silver Lake, said: “We are thrilled with Skype’s transformation during the period of our ownership and grateful for the extraordinary commitment of its management team and employees. We are excited about Skype’s long-term future with Microsoft, as it is poised to become one of the world’s most dynamic and comprehensive communications platforms.”
Founded in 2003, Skype was acquired by eBay in September 2005, and then acquired by an investment group led by Silver Lake in November 2009. Skype has made impressive progress over the past 18 months under Silver Lake’s leadership, increasing monthly calling minutes by 150 percent, developing new revenue streams and strategic partnerships, acquiring the intellectual property powering its peer-to-peer network, and recruiting an outstanding senior management team.
Other members of the selling investor group led by Silver Lake include eBay International AG, CPP Investment Board, Joltid Limited in partnership with Europlay Capital Advisors; and Andreessen Horowitz.
The acquisition is subject to regulatory approvals and other customary closing conditions. The parties hope to obtain all required regulatory clearances during the course of this calendar year.
About Skype
Skype is communications software whose purpose is to break down barriers to communication. With an Internet-connected device, families, friends and colleagues can get together for free with messaging, voice and video. At low cost, they can also call landlines or mobiles virtually anywhere in the world. Skype has recently introduced group video, allowing groups of more than two people to do things together whenever they're apart.
Skype is communications software whose purpose is to break down barriers to communication. With an Internet-connected device, families, friends and colleagues can get together for free with messaging, voice and video. At low cost, they can also call landlines or mobiles virtually anywhere in the world. Skype has recently introduced group video, allowing groups of more than two people to do things together whenever they're apart.
Founded in 2003 and based in Luxembourg. Skype can be downloaded onto computers, mobile phones and other connected devices for free.
About Microsoft
Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.
Forward-Looking Statements
Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:
| • | Execution and competitive risks in transitioning to cloud-based computing; |
| • | Challenges to Microsoft’s business model; |
| • | Intense competition in all of Microsoft’s markets; |
| • | Microsoft’s continued ability to protect its intellectual property rights; |
| • | Claims that Microsoft has infringed the intellectual property rights of others; |
| • | The possibility of unauthorized disclosure of significant portions of Microsoft’s source code; |
| • | Actual or perceived security vulnerabilities in Microsoft products that could reduce revenue or lead to liability; |
| • | Improper disclosure of personal data could result in liability and harm to Microsoft’s reputation; |
| • | Outages and disruptions of services provided to customers directly or through third parties if Microsoft fails to maintain an adequate operations infrastructure; |
| • | Government litigation and regulation affecting how Microsoft designs and markets its products; |
| • | Microsoft’s ability to attract and retain talented employees; |
| • | Delays in product development and related product release schedules; |
| • | Significant business investments that may not gain customer acceptance and produce offsetting increases in revenue; |
| • | Unfavorable changes in general economic conditions, disruption of our partner networks or sales channels, or the availability of credit that affect demand for Microsoft’s products and services or the value of our investment portfolio; |
| • | Adverse results in legal disputes; |
| • | Unanticipated tax liabilities; |
| • | Quality or supply problems in Microsoft’s consumer hardware or other vertically integrated hardware and software products; |
| • | Impairment of goodwill or amortizable intangible assets causing a charge to earnings; |
| • | Exposure to increased economic and regulatory uncertainties from operating a global business; |
| • | Geopolitical conditions, natural disaster, cyberattack or other catastrophic events disrupting Microsoft’s business; and |
| • | Acquisitions and joint ventures that adversely affect the business. |
For further information regarding risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations website.
All information in this release is as of May 10, 2011. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.
For more information, press only:
Rapid Response Team, Waggener Edstrom Worldwide for Microsoft, 503-443-7070, rrt@waggeneredstrom.com
Press Conference/Conference Call/Webcast
On Tuesday, May 10, at 8 a.m. PDT, [Microsoft and Skype] will host a press conference at the Four Seasons Hotel in San Francisco and at Microsoft Ltd, Customer Centre, Cardinal Place, 100 Victoria Street London, UK SW1E 5JL.
The conference will also be webcast. Links to the webcast and accompanying documents will stream live on the Microsoft News Center at 8:00 a.m. PDT.
For dial-in access, please dial 888-942-9536 within the U.S. or 212-547-0187 outside the U.S. Enter passcode MICROSOFT to join.
0 comments:
Posting Komentar