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Microsoft buys Skype for $8.5 billion, so now what?

Microsoft has purchased Skype in an $8.5 billion deal that will close later this year. See why we shouldn't worry about the free service going away and what Microsoft is likely to do with Skype.

After months of speculation about who would buy it, Skype finally has a new home. Microsoft swooped in at the last minute and nabbed Skype for $8.5 billion in cash, the largest acquisition Microsoft has ever done.

A lot of people are concerned about the future of Skype at this point since Skype has always embodied the grassroots ethos of the Internet by allowing users to do free voice and video calls to anyone on the planet using its peer-to-peer protocol and software. Now, Skype is owned by one of the world's largest corporations, which we'd think would want to use it to draw more money out of the half billion Skype users around the world.

Microsoft CEO Steve Ballmer and Skype CEO Tony Bates shake hands. Photo credit: Harry McCracken | Technologizer

While Microsoft has rocky history with acquisitions, I don't think we should be too concerned about the company destroying Skype or changing it from a free service to a paid service, and I'll explain why.

First and foremost, Microsoft knows that it bought a consumer service that is loved by the public, and a most of Skype's value is based on the huge number of users it has. Turning Skype into a paid service would immediately shrink the user base and decrease the value of the property. That's the business reality of the situation.

Second, Microsoft plans to make Skype an independent business unit within the company, with Skype CEO Tony Bates as the head of the division. That's a good sign that Microsoft plans to invest in Skype, do a lot more with it than just the stuff we've seen so far, and turn it into a larger platform rather than just a voice and video service. For more on that, let's take a quick look at what the chiefs had to say about the deal:

Microsoft CEO Steve Ballmer said, "Skype is a phenomenal service that is loved by millions of people around the world. 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 CEO Bates said, "Microsoft and Skype share the vision of bringing software innovation and products to our customers. 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."

That definitely sounds like there are already plans for growing and expanding Skype, which has been languishing for years with minimal new features and product development. With Microsoft's resources behind it, there's the potential that Skype could be unleashed to start innovating again.

In terms of Skype remaining free, remember that Microsoft has been running its Messenger for years (under various names such as Windows Live Messenger and MSN Messenger) as a free service. The big question there will be whether Microsoft converts Messenger to Skype to turn it into an even larger pool of users to compete more effectively against Yahoo Messenger and GoogleTalk.

The other big question is about Skype's multiplatform support. Skype has traditionally released the newest features and updates for Windows first, but has also maintained versions of its client for Mac and Linux, which eventually get the latest features after a few months lag time. In its official release about the acquisition, the company stated, "Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms." However, I'd expect Microsoft to continue the Windows-first tradition and not unify the development of the three clients (which we might have gotten if Google had bought Skype).

Bottom line

Microsoft is likely to keep the status quo with Skype's current consumer service, with only minimal changes. Meanwhile, on the high end, Microsoft will work on building a business communications platform with Skype by making it a corporate unified communications platform that is tightly integrated across Microsoft's business software, servers, and services.

At the Skype press conference, Ballmer said, "We dream about experiences that are not limited by distance or device."

Think of being able to securely IM a document directly from Microsoft Office to a Skype user on the other side of the world on a smartphone, or being able to use your Skype client to dial into a corporate telepresence system when you're on the road. Those are types of things Skype has been capable of for years but hasn't delivered on, and I expect we'll see Microsoft focus on those opportunities.

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About

Jason Hiner is Editor in Chief of TechRepublic and Long Form Editor of ZDNet. He writes about the people, products, and ideas changing how we live and work in the 21st century. He's co-author of the upcoming book, Follow the Geeks (bit.ly/ftgeeks).

102 comments
Topit
Topit

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michaellashinsky
michaellashinsky

"First and foremost, Microsoft knows that it bought a consumer service that is loved by the public, and a most of Skype???s value is based on the huge number of users it has. Turning Skype into a paid service would immediately shrink the user base and decrease the value of the property. That???s the business reality of the situation." Do you really expect Microsoft to let common sense get in the way? How many billions of dollars have been pored into the browser wars, file format wars, search wars, and trying to copy everything and anything Google? (Google could just keep having interns make up silly apps so M$ would spend $$$$$ copying them...)

michaellashinsky
michaellashinsky

"First and foremost, Microsoft knows that it bought a consumer service that is loved by the public, and a most of Skype???s value is based on the huge number of users it has. Turning Skype into a paid service would immediately shrink the user base and decrease the value of the property. That???s the business reality of the situation." Do you really expect Microsoft to let common sense get in the way? How many billions of dollars have been pored into the browser wars, file format wars, search wars, and trying to copy everything and anything Google? (Google could just keep having interns make up silly apps so M$ would spend $$$$$ copying them...)

vikasfrndz4u
vikasfrndz4u

i thnk might be MShave some innvative plan abt Skype nd its servces Rember MS alwaz invest somthng whn dey really gng to innvate somthng . it is true that google n apple rgood competitrs but MS alwayz act as a leader to start new challenges or opprtunitis. Nothing but sure now agan a competition will start which beneft users

jfuller05
jfuller05

what Microsoft and Skype will have to offer us down the road. Sounds good to me.

pccaretraining
pccaretraining

Knowing the Microsoft agenda they probably see great potential for gathering our personal information, spying on conversations, selling data to Federal Agencies etc. and as previously mentioned probably do away with the bothersome encryption that limits their access. But is there an option out there that isn't doing this?

Quirkey
Quirkey

I miss the future of the status of encryption in Skype. Now Microsoft has bought it, are they going to build in the secret back door some US & non US governmental services want to have?

chaz15
chaz15

I'm not sure it would worry Microsoft to have a pay-for only reduced Skype customer base. Microsoft being Microsoft - MICROSOFT's business reality is to make AS MUCH money in as short a time as possible. While it would undoubtedly be a huge travesty and tragedy if Microsoft were to make Skype entirely a pay-for service, nothing would surprise me from Microsoft, and I think it might be when, not if . . . Just HOPE I'm wrong on this one!

TheiJerk
TheiJerk

I love "biased know it all" types. You guys really show how smart you are and how you try to influence others with fear and immature tactics that have worked on you sometime in the past. I'll wait to see what happens, when it happens, either way; it won't be a surprise.

realvarezm
realvarezm

Do you think that Microsoft will keep the service quality for the free users that Skype had until today? Maybe it won???t decrease soon after the close of the deal but mark my words it will decrease so people pay for support or better quality. There???s a thing about Microsoft that tends to ruin everything they touch. Especially free user value products and there???s a reason why, they need to make a profit especially when they try to make that profit as big as possible. Time will tell about this, I hope to read this in the future and laugh about it ,because instead reduce they quality, it actually improved.

rAllcorn
rAllcorn

Specializing in the "Mobile Computing" (virtual, roaming, etc.) field, I have been a SKYPE user for years! I have a "landline" number (SKYPE-IN), and several VoIP SKYPE accounts. I use it frequently, in Business, and in the Ministry to speak to ministers in foreign countries. I've "seen" the people I work with, something that might not otherwise have been possible, and have talked with them, eFace-to-eFace! This has greatly improved our relationships, to say the least! I am also a BIG LINUX user, and a firm believer in the OpenSource way of life. With SKYPE becoming the property of probably the biggest "counter" member of this society, I am deeply concerned, and already looking for an "OpenSource" alternative. But, before bailing, I plan to wait ... and 'see' what Microsoft does. Are they going to shove Microsoft crap down my throat? Like the Windows Live, or MSN ... I believe in people having a "choice"! Do you like LINUX, or UNIX? Maybe Apple's OS/X? or even Microsoft? You should be able to use what you want - NOT because somebody strong-armed it down your throat by over-crowding a market, but because you like their GUI (the interface) and the way it works ... because you like the reliability and the style of the OS ... and not because it's "what everybody is using now". Speaking of SKYPE, my notebook is ringing (incoming landline call) ... Gotta go! -rAllcorn- Richard A. Allcorn email: richAllcorn@ITNetworking.info SKYPE: richAllcorn

AlaskaHome1959.mailinglists
AlaskaHome1959.mailinglists

If you think there is nothing for Skype customers to worry about, you been smoking too much dope. Look at Microsoft's history of software acquisitions and it's not hard to predict what's gonna happen: MS will leave Skype intact for a while while they are raping all the features and technology out of it. Those features and technology will be incorporated into Windows for Phones. Then Microsoft will kill Skype, claiming they haven't really killed it since it "lives on" in Windows for Phones. Remember folks, you read it here first.

sperry532
sperry532

What Microsoft says and what it does are two, entirely different things. We've seen it over and over. I would say Skype has between 9 and 18 months before it gets "improved" to unusability by Microsoft. Pity, really. I like the program and the service.

gpachello
gpachello

I can see a clear strategy here, based on these previous announcements: 1 - Microsoft abandons Kin 2 - Microsoft signed an agreement with Nokia 3 - And now Microsoft buys Skype Regards. GDP.

lj011
lj011

Has already diminished in functionality - between versions 2.8 and current 5 Skype has shed of many useful functions and gone less usable. I started using Skype when it was P2P and then after transformation to commercial I was supportive of giving them a credit. But this move, with Microsoft acquiring it, is the last straw, there is no road from here. I am sure that MS will slowly forget non-windows users. No doubt. I will start looking for alternatives (there is already ooVoo in the game) but I'd like to see something that works on all platforms, time will show where we are to go. IT changes - so we'll do it as well.

bobk1
bobk1

Ekiga is open-source and uses open protocols including SIP and H.323 (www.ekiga.org). It supports audio, video, instant messaging, and SMS. On Fedora 14 (Linux), it is called Ekiga Softphone. There is a version for Windows. You can get a free SIP address at ekiga.net. Oh, did I mention that Ekiga is free to use computer-to-computer. You can buy an account to call out to plain phones. You can also buy an inbound phone number (DID). Don't know how it compares in quality to Skype.

infospy
infospy

I'll be happy to have skype on my xbox 360 through kinect, would be perfect.

oldbaritone
oldbaritone

Nah... it just faded into obscurity. I believe "the handwriting is on the wall" for Skype. It will take a few years.

ihuvos
ihuvos

I am sharing the supposition of Jason Hiner that Skype remains free to use. His explanations are convincing. My concern is - knowing Microsoft's many years' practice - how many absolutely unneccessary services will be added making Skype more and more complicated more and more heavy and more and more slow.

billyg
billyg

MS licensing tends to target service providers. Silverlight, for instance, feeds on the developer tool sales and the server side tie in to MS products. Skype may end up as part of that .NET revenue bundle. So MS may extract revenue while keeping the service free. I worry more about the angry anti-MS dark cloud taking umbrage at this acquisition and targeting Skype services with attacks. On the upside I see MS wanting desperately to break into the mobile market. If they can strike an agreement with the carriers that delivers what Google Voice so awkwardly danced around (voice at the cost of data usage -- essentially free on Verizon for now...) then I can see this making a phone running the MS stack very attractive to the consumer.

ttsquare
ttsquare

We use the MS Unified Communications Server (also called Lync) where I work for phone, video conference, teleconference, IM, Web conference (Live Meeting), etc. Skype is a quick way for MS to acquire technology to make that system better, though I am sure MS has much larger plans than that.

rickl1
rickl1

Everyone knows about Skype. Most people have it. Here's a chance to use the brand to add remote control, file transfer, tele-conferencing, basically all the stuff Go-To-My-PC does and then some. YouTube-like functionality can be added. Microsoft can make the Skype client one-stop shopping for delivery of everything that isn't offered by IE.

rickl1
rickl1

Everyone knows about Skype. Most people have it. Here's a chance to use the brand to add remote control, file transfer, tele-conferencing, basically all the stuff Go-To-My-PC does and then some. YouTube-like functionality can be added. Microsoft can make the Skype client one-stop shopping for delivery of everything that isn't offered by IE.

dirtylaundry
dirtylaundry

I used to use Paltalk long before most people even knew what VOIP was...saved me tons of $ even tho back then the calls from PC to phone were crappy. Then I found Skype beta and fell in love. Best headset/mic for VOIP has been Logitech G330 (oddly the USB adapter it comes with works better than the direct 3.5mm connection.) I also use Mumble, TeamSpeak3, and Ventrilo all with excellent results using this headset. After this bit of news tho, I went ahead and re-downloaded Paltalk because I am sure the Skype I know and love will not be the same once M$ starts touching it. I am not even appeased by the *separate division* marketing ploy they are dishing out. This was a sad news day for me.

Regulus
Regulus

Well, at least it didn't go to XX&X telecom whom we all know and love. I've been a Skype user for years. Like many 3rd party programs, part of the joy of use was the freedom from that massive, smelly foot of repression that you may get with a major provider. Yes, I also have Linux dual-loaded on my primary units. I am thus concerned with the possibility of corruption to Linux support to the Skype product. Please, don't do a 'Microsoft' to Skype

fredyrosal
fredyrosal

MS will ruin it ... everything they touch, they destroy. Prepare to have unstable Skype implementations in non-Windows platforms.

hkphooey
hkphooey

I don't really see why MS bought Skype at all. They already have the MSN service, which can do video and audio chat. And IM of course. So what are their intentions here? Do they want to convert all the Win/Mac/Lin skype users over to MSN? In which case they'd better provide a common platform. Or maybe the other way around? MSN + Skype will move towards the Skype platform. Either way it needs to be unified platform which will support Windows, Mac, Linux, Android, WinMobile ... OK basically every desktop and mobile operating system. Then it can become great. However if they fail to make it a completely unified messaging platform, then it will fall by the wayside. I speak as a Linux Skype user, who pays to use the SkypeOut service to call landlines and mobiles around the world. Of course I will leap to any other platform which allows me to do the same, if things start to look dodgy.

dmessenger
dmessenger

ReelPortal is an open source video chat/conferencing app that works pretty well. It's not as fancy, but you don't have to have any type of account to use it. You can also host your own server. It's cross platform capable too. I don't about how quickly development on this app will progress as I just found it a few days ago, but I think it's worth checking out if anyone is looking for a video chat alternative. This does not have the ability to make phone calls though. http://www.reelportal.com

Twosmiles
Twosmiles

Im wondering why Microsoft do this step and buys Skype , well it comes good when skype function with voip becomes standard in Win 8 in the next realeases , but like I know Microsoft it's gonna first change the name to something like Skyposoft and then release it in paid applications , then we are gonna see cracked versions and pirated serials in the market ,not to mention the bugs !!

MrRich
MrRich

Sad that another great European startup will now be owned here in the states. I think its good that Microsoft doesn't have as many competing products as Google. Both companies play in the game of eating up tech innovations from other companies and reselling them for less. I predict a future like that of Hotmail. Unless Microsoft invests and articulates a vision for the service, Skype will be irrelevant in 5 years. Right now Skype, Google and Facebook are the technical infrastructure that brought us the Arab Spring. Skype is very relevant and only growing in importance. Good timing Steve...

techiegz
techiegz

This is a big deal and will be a great pain in the groin for competitors. MS has already explicitly said they are bringing it to Windows Phone, that alone is huge because people can then call/video call free or fee using it from their mobile phone and also have IM/presence that is already coming to Windows Phone later this year. The Xbox and PC as well as even much more feature development and Voice/Video services for businesses. Very strategic. MS's greatest and potentially best acquisition.

Patrick zulu
Patrick zulu

Ok it business But what ever the case i have always known microsoft to be more Profit oriented. I just hope them buying skype wont only benefit them, but they should always put a consideration on the 1/2 a billion users world wide....

MacNewton
MacNewton

Microsoft CEO Steve Ballmer has a way with words, can you say. "developer,developer,developer! After years of mediocrity and weak sales, Microsoft is finally killing off its Zune media player. How long will it take Ballmer to totally kill this product. I give it about 3 years. They paid to much and now the investors will end up paying. Win 7 smartphone s are only selling because theres a buy one get one free deal with the telcos' I wonder what will happen first, support & service will go down hill, or will pay for call pricing go up.

jhoward
jhoward

Frankly I think Google stayed away because Big Blue Button has more potential (read: not quite there yet but much easier to leverage as a business right now) and none of the IP issues that Skype has. Of course if they could have gotten it at a reasonable price to play keep away from other companies like Microsoft and Apple then it would have been worth it. In the end video conferencing and IM are problems that are already solved in both the consumer and business world by many different application vendors. In this case Microsoft bought a name praying they could leverage another company's reputation on top of their own. Let's be honest - 5 years ago this may have been big but right now with so many video and voip applications out there this is a giant waste of money by MS.

alissakatz
alissakatz

Pity, I liked skype, but will not be using it anymore.

ssharkins
ssharkins

Someone hacked my skype account and charged $30 to my account. They admitted it, and I still have the email to prove it if anyone wants to see it, but they have refused to refund the money. They said they'd taken care of the problem on their end and just kept telling me to talk to my bank. Don't think much of skype now. But now that they have billions, surely they can process that refund now??????

shsull
shsull

MS will somehow find a way to tuck-it to its customers.

alastair
alastair

Its true. Wondered why Skype is awful at updates on other platforms other than Windows? Simple answer is that it lost its technical prowse when it got bought by Ebay. Skype uses other vendors to develop its software and will only push for an update when there is a security flaw, etc. Hence why Skype on Andriod is awful. Its such a shame. The alternative is SIP, which works pretty good, is an open standard, and most importantly, lots of vendors to choose from.

seanferd
seanferd

That, and fax capabilities.

jck
jck

And PowWow...and some others. I have used so much software...wait...that's my head i feel spinning lol :^0

AnsuGisalas
AnsuGisalas

If MS is thinking that VoIP will replace normal cell-phone use, they could be planning to integrate skype code with W7P or it's descendants at a basic level...

jck
jck

People got so big on Skype for audio capabilities years ago. I was doing group voice chat with friends all over the world on YM years ago. You can video now too. And, it's free. Of course, I Think MS got their hands on Yahoo's data too. So, I'm not safe there either. :(

jck
jck

a) name recognition - Skype is a premier name in conferencing b) eliminate competition - gets rid of the biggest tool out there used by people c) gets them info - Skype's info is now MSes d) affect competition in other markets - MS can deter use in Linux, eliminate it, or use it as a foothold to affect certain aspects of it. Remember, Gates got into bed with Adobe and HP early to affect how the printing world worked in the early days of GUI-based PCs. This might be Ballmer's way to get a recognized brand to use, as well as be able to affect how voice/video conferencing on Linux for the masses is done. You never know what MS will try to pull when they get their foot in the door somewhere.

BigJohnLg
BigJohnLg

Your bank can handle that problem, if you even have a bank.

Neon Samurai
Neon Samurai

Skype may be unable to initiate the reversal of charges if it's somewhere in the banking system. I had similar grief with Clearnet who couldn't even transfer a payment from Clearnet West to the local Clearnet accounting office. I had to walk a bunch of account printouts to my bank branch and have them investigate/reverse the transfer from there end. If Skype said you need to talk to your branch and you haven't yet, you really can't complain much. Now, if you have since talked to your bank and your getting stonewalled from both ends.. yeah.. that's reason for a little rage.

jwhite
jwhite

I was wondering about the general tech prowess of the readership here when I saw so many Skype fans posting on this article. Skype WAS a great idea, and had a promising start. Around the time they were bought by EBay, their service was still flaky and low quality, every client (even Windows) was buggy and bloated, there was essentially no user base (no enough to matter), etc. I've always hated Skype since they still haven't been able to "master" making a bluetooth headset work when using a mobile version. Or actually notifying the user when a call is coming in.... if you can't rely on it, it's junk!

Neon Samurai
Neon Samurai

The new user interface will now have a Mono dependency of course and a Moonlight dependency to deliver Silverlight written advertising.

seanferd
seanferd

That was reserved by the developers.

seanferd
seanferd

Fortune Brands also own Jim Beam and a bunch of other alcohol producers. American Brands also own a crapton of companies.

jck
jck

Microsoft controls cars... computers... home appliances... now communications. I'm waiting for them to buy Kohler, Pella, Anderson, Moen, Braun, GE and John Deere too, and just take everything over. By 2050, they will know when you woke up, took a shower, made a pop tart, drove to work, called your spouse, and took a dump. Scary. :(

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