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Microsoft to buy Skype for $7 billion

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Re: Microsoft to buy Skype for $7 billion

#181

Post by horatiumocian »

cfinke wrote: post #5

Maybe I've missed something, but what has changed in the two years since eBay spun off Skype at a valuation of < $3B to make it worth more than $7 billion today?

1) Skype has stronger growth than when it was owned by eBay

2) When it was spun off by eBay, Skype acquired the IP of their P2P technology from the founders. This makes it more attractive to suitors

3) Skype has filed for an IPO, which would give its valuation a premium

These are the reasons that make Skype more valuable now than when it was spun off by eBay. If you add a bidding war between Facebook, Google and Microsoft, it explains the $7 billion valuation.

However, I agree that $7B is too much for Skype, unless there are great synergies for the acquirer.

Re: Microsoft to buy Skype for $7 billion

#182

Post by justincormack »

Skype's (technical) HQ is in Talinn just across the water from Nokia, Microsoft's other new "acquisition"... useful for their mobile strategy perhaps?

But Skype's infrastructure is all Linux + Postgres (they are a huge Postgres user), so maybe they will be forced to rewrite it all on SQL server for the next few years.

Re: Microsoft to buy Skype for $7 billion

#183

Post by nikcub »

As many users as Facebook, many of those users have entered their payment details, a great brand that is just as big as Facebook, and synonymous around the world with communication.

I just happen to be talking to a non-tech computer user on the weekend who told me that he and his entire family and friends overseas do not use Facebook because Skype does everything they need in terms of staying in touch and it has worked for them for years.

They should start over with the software and spin it into a web and mobile service. It is a great platform to take on Facebook with - a much simpler service for basic video or text chat, and add in some photo sharing, email, etc.

Google really missed out on an opportunity here - I bet that whatever they end up producing internally will not be merely as good or as popular as a new Skype run by Microsoft.

In terms of the price, it would almost be a worthwhile purchase with just the users and brand - the near-billion in revenue is just a bonus. Skype has near $1B in revenue, and most of the expenditure is related to writing down and amortizing assets as part of the acquisition (something that most PE groups do when they takeover a company - part of what makes some of these deals profitable and worthwhile). Number of Skype users and revenue is growing remarkably. If you look at the published financials[1], $97M was written off as cost of acquisition, another $250M was amortization of assets that were written down at acquisition. Their 'real' costs are $131M in marketing, $72M in development and $104M in administration - which brings gross profit closer to $500M+ for YE 2011. PE of 17-20 is a bargain, especially considering that Microsoft can significantly reduce expenditures by integrating the company into the web group.

I think this is a great deal, very different to ICQ (the immediate parallel that everybody is drawing) and much closer potential to the eBay PayPal deal. If done right, this could work out as well for Microsoft financially as PayPal did for eBay (remember PayPal wasn't doing so well financially at the time [2] - everybody called that deal crazy at the time as well) - add to that the potential of Microsoft taking on Facebook in the 'online communication for ordinary folk' sector - and it is a great,

[1] http://www.sec.gov/Archives/edgar/data/1498209/0001193125110...

[2] http://www.ygoodman.com/ppipo.html

Re: Microsoft to buy Skype for $7 billion

#184

Post by blub »

brianpan wrote: post #162
blub wrote: post #158

Earlier quoted context omitted.

Companies don't have ethics, but a company that sells eyeballs for money is much more likely to take decisions that negatively impact customers compared to a company that sells producs. Google and Facebook would have been worse for Skype, they both suck at privacy.

This is getting way off topic, but of course companies have ethics. Just like they have core values, goals, and ambitions... A company is made up of people and those people can choose to make ethical decisions and can have a history of acting ethically or not.

The fact that employees have ethics does have an effect on the actions that the company takes, but that doesn't mean that the company itself "has ethics". At most we can say that a company employs ethical individuals - still - that won't necessarily lead to ethical decisions. Things like peer-pressure, the board of directors, profits, strategy, market pressure and so on can make good people do bad things.

Historically we can see that companies (especially corporations) are as ethical as the laws force them to be, especially when it comes to decisions affecting the bottom line.

Re: Microsoft to buy Skype for $7 billion

#185

Post by codelion »

dasil003 wrote: post #171
codelion wrote: post #145

Earlier quoted context omitted.

http://ignorethecode.net/blog/2011/03/30/skype_5/

Why are you replying that to me? My comment revealed no value judgement one way or the other about any version of Skype, it was just a joke.

Hmm, I got lost in the comment nesting. Never mind.

Re: Microsoft to buy Skype for $7 billion

#186

Post by blub »

crocowhile wrote: post #163
blub wrote: post #158

Earlier quoted context omitted.

Companies don't have ethics, but a company that sells eyeballs for money is much more likely to take decisions that negatively impact customers compared to a company that sells producs. Google and Facebook would have been worse for Skype, they both suck at privacy.

How can you put Google and Facebook next to each other talking about privacy? They are on different planets.

No, they are very similar.

* Most of the services they provide are free (with a hidden privacy tax).

* They make most of their money based on analyzing their user's data.

* Both have a hostile attitude towards privacy, claiming that it's dead, trying to make it look old fashioned and irrelevant.

Re: Microsoft to buy Skype for $7 billion

#187

Post by fullmoon »

netcan wrote: post #165
jsz0 wrote: post #87

This is Microsoft's ICQ moment. Overpaying for a company at the moment when its core competency is becoming a commodity. Does anyone have the slightest bit of loyalty to Skype? Of course not. They're going to use whichever video chat comes built into their SmartPhone, tablet, computer, etc. They're going to use FaceBook's eventual video chat service or something Google offers. No one is going to actively seek out Sky…

My mother, father, brothers and friends in 3 countries all have skype running most days. Skype have my credit card so I always have skype-to-phone available (I use it mostly to find my cell). It's been that way for me for about 7 years. That means I have skype running and I use it every day (but I only spend about $20 per year). It's not loyalty, but network effects and momentum count for something too. Not sure that…

Thanks for reminding me to remove my credit card info.

Re: Microsoft to buy Skype for $7 billion

#189

Post by beedogs »

natesm wrote: post #17
1880 wrote: post #10

I guess the Linux client will stay beta forever... sigh

That's probably best, after what they did to the Mac one.

I can't believe what happened to it. Nobody warned me; I updated one day on my MBP and it was suddenly an unusable mess.

I'll miss the Linux client when Microsoft kills it. :(

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