Microsoft’s Skype Grab Promises as Many Challenges as Benefits

Event Summary

May 10, 2011 -- Microsoft has entered into a definitive agreement to acquire Skype for $8.5 billion in cash. Microsoft plans to integrate Skype with Lync and Outlook, as well as consumer-oriented products and services such as Messenger, Hotmail, and Xbox Live. Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms. Skype will become a new Microsoft business division led by Skype CEO Tony Bates. Assuming it receives regulatory approval, the acquisition is set to close by the end of this calendar year.

Quick Take

Analytical Summary

• Current Perspective: Moderate on Microsoft’s proposed acquisition from Skype, because the move promises to supply a cloud-based voice and video platform to complement the on-premises and cloud-based UC products and services Microsoft sells to businesses. However, product integration issues, considerable feature overlap, and Skype’s limited relevance in the enterprise communications market will temper the relevance of a combined Microsoft-Skype in the enterprise space.

• Vendor Importance: Very high to Microsoft, because the acquisition of Skype will directly impact the development of multiple products and services that Microsoft sells in both the business and consumer markets. With Skype, Microsoft will be able to provide a voice and video platform that can underpin the communications capabilities already accessible via Office and Lync for enterprises, Messenger and Xbox Live for consumers, and Windows Mobile for both enterprises and consumers.

• Market Importance: High on the business communications solutions and services market, because a company that has hitherto been a potential partner to developers of UC solutions will become part of one of their foremost competitors. Microsoft’s UC customers and resellers will, in time, see an expanded set of cloud-based services delivered to them. Moreover, Skype’s business customers (again, in time) could benefit from Microsoft’s greater focus on the business communications market than Skype has shown to date.

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