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Microsoft to buy Skype for $7 billion

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Re: Microsoft to buy Skype for $7 billion

#201

Post by jasonlotito »

jeza wrote: post #176
jcampbell1 wrote: post #112

Earlier quoted context omitted.

I don't understand. AOL bought ICQ for 400M, got patent exclusivity to IM for some time, sold a bazillion ad dollars during the dotcom boom through the ICQ client, and then sold the company recently for 200M. I am sure AOL came out ahead on that deal. What is an ICQ moment?

Though in terms of your average joe, no one seems to know about ICQ anymore. Those that do seem to remember it as something of the past (remember those days when we all chatted on ICQ?). Ironically though in Australia it was MSN that took over the market from ICQ. I guess because so many people had a hotmail account and the client came with their computer. Now if only people would switch so quickly to Jabber/XMPP as…

Maybe for the average Joe in the US, but it's still widely used around the world.

Re: Microsoft to buy Skype for $7 billion

#202

Post by navs »

Dylan16807 wrote: post #90
damncabbage wrote: post #53

Earlier quoted context omitted.

Which is great. It does pretty much everything the Windows client does (chat, voice, video, desktop sharing), without the big, gaudy, annoying interface. I fear that it'll just go away, or actively get shut down by compatibility changes. (My friends and I practically live on Skype. The one killer feature for us is persistent chatrooms; it's like IRC, except when I log in I get all the missing chat history I didn't ge…

The linux client is missing a critical feature for me: joining an in-progress audio call. One call I'm in is almost always running, and the host is often not there to add me. I end up running windows skype in a VM when I'm on linux.

Yes, I found this very annoying. I remember the previous OSX version was also missing this and I often got laughed at because I couldn't join a call. Apparently this was Steve Jobs fault or something along those lines.

Re: Microsoft to buy Skype for $7 billion

#204

Post by brudgers »

nikcub wrote: post #183

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 work…

>"As many users as Facebook"

I suspect that there is a closer correlation to one account = one person with Skype than Facebook since there is little social incentive to create multiple Skype accounts. In addition, the strength of relationships between Skype customers is more easily determined. Finally, Skype has the potential to scale well into MicroSoft's core B2B business model.

Re: Microsoft to buy Skype for $7 billion

#205

Post by netcan »

jakarta wrote: post #199
netcan wrote: post #165

Earlier quoted context omitted.

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…

From the estimates I have seen, Skype generates $250mm in EBIT per year. That would mean that Microsoft is paying 28x earnings. If we want to approximate EBIT as free cash flows (not the same, but this is back of the envelope) and assume a 10% discount rate, to break even Skype would need to be growing EBIT at 6.4% annually for the next 10 years or so. I don't know how achievable that really is, but maybe they could…

nikcub has a comment on this thread that convincingly puts Skype "gross profit close to $500M+ for YE 2011."

I was going off an article that had skype revenue/profit as 859.8/20.6 for 2010 and negative the year before. I assume that the accounting tricks of having been bought by a PE firm that he mentions are responsible for the discrepancy.

If true, P/E is Still, I doubt that is really what MS is after.

Re: Microsoft to buy Skype for $7 billion

#206

Post by riams »

jakarta wrote: post #199
netcan wrote: post #165

Earlier quoted context omitted.

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…

From the estimates I have seen, Skype generates $250mm in EBIT per year. That would mean that Microsoft is paying 28x earnings. If we want to approximate EBIT as free cash flows (not the same, but this is back of the envelope) and assume a 10% discount rate, to break even Skype would need to be growing EBIT at 6.4% annually for the next 10 years or so. I don't know how achievable that really is, but maybe they could…

That is, if they keep Skype as it is. There are, however, more than just financial reasons for this acquisition. 2 reasons off the top of my head:

1. Microsoft will gain from Skype's synergy with their existing portfolio. Think Skype + Live Messenger or Skype + Windows Phone 7.

2. Block competitors from purchasing. Microsoft, Google and Apple (to some extent even Facebook) have businesses that are increasingly overlapping. Skype in the hands of a competitor becomes an alternative cost for Microsoft.

Re: Microsoft to buy Skype for $7 billion

#207

Post by riams »

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…

"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."

Really? I'm thinking the barriers to switch from Skype are pretty high due to the vast amount of users Skype has. Why switch to a slightly more polished product when you have no one to communicate with there?

We have to remember that the Hacker News crowd probably represents early adopters. Most people will not be as quick to try/switch to new services.

Re: Microsoft to buy Skype for $7 billion

#208

Post by JoeAltmaier »

utnick wrote: post #130
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…

Not 100% sure, but I think the moneymaker and core competency for skype is not video chat. I have a skype account, I pay for a personalized USA number that people can call with their phones and reach me around the world, I also pay for the ability to dial any number around the world. All of my work contacts also have skype accounts which we use to communicate. It would take quite a bit to get me to move off of Skype.

How about move up then? I work for Sococo, and they have a service for distributed teams like yours. Always-on, no minute charge or limit, plus expanded presence information like you wouldn't believe. Can also call out/in, share docs and views, works on Mac/linux/Windows.

Above it was mentioned Skype has no loyalty, will be replaced when something better comes along. We're hoping thats Teamspace, Sococo's 1st product.

Re: Microsoft to buy Skype for $7 billion

#209

Post by JoeAltmaier »

alanh wrote: post #103
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…

Agreed completely. Skype certainly has brand recognition and people know it’s “the” way to keep in touch across the ocean, but — and I don’t have studies to back this up — I bet it’s one of those brands people know but don’t feel very fond of. Skype is kind of annoying, for one, and is less reliable and more complicated than traditional telephone solutions (by virtual necessity, but that doesn’t matter). This should…

But also its the "facebook effect", where you go there because everybody else is there. So that's in Skype's favor.

Re: Microsoft to buy Skype for $7 billion

#210

Post by MatthewPhillips »

raganwald wrote: post #129
lurker19 wrote: post #80

Earlier quoted context omitted.

Mac is not a PC. Apple will hesitate a long while before bringing Facetime to the PC, because Facetime promotes all-important lock-in to the Apple ecosystem and sells Apple hardware.

I will bet a bottle of single malt that Apple will bring FaceTime to the PC. I agree that FaceTime sells Apple hardware, but I think the hardware they want to sell is the iOS product line. Weigh how many Mac sales the will lose if people can get FaceTime on a PC against how many iPhone and iPad sales they will make to people who can now chat with Grandma on her PC? Ubiquity on the desktop and exclusivity on the mobil…

Are we talking about the same company? The only time Apple ports their software to different environments is when they are in a position of weakness (like they were when they reluctantly put iTunes on Windows). I don't think a single Apple iOS app has made it's way to Android, or any new Mac software has been ported to Windows in recent years. You can accuse Microsoft of a lot of things, but they've always been willing to port their software when there is a buck to be made (they are a software company after all).
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