Microsoft to Acquire Skype
Combined companies will benefit consumers, businesses and increase market opportunity. — 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 …
Context & Ripple Effects
Two days of speculation ended fast: GigaOM reported on May 8 that Microsoft was 'in the mix' for Skype, alongside Reuters-sourced talk that Facebook and Google had been in talks for a partnership or an outright buy. Today Microsoft closed the door on both, signing a definitive agreement for $8.5 billion — a striking sum given Skype's scale relative to Microsoft's own valuation, which analysts had already flagged as lagging despite earnings comparable to Apple's.
The deal travelled widely on day one — Reuters, Bloomberg, TechCrunch and others all picked it up — but reception was split: Reuters' analysis piece says investors slammed the price, while Ballmer's internal email ('Exciting times!') and a joint press appearance pitched reach to 'everyone on the planet'. Skype has confirmed it will land across Xbox, Outlook and Windows Phone, and Microsoft is housing it in a new business division rather than folding it into an existing one.
First-order effects
- Investors immediately punished the announcement — Reuters reports shareholders slamming the $8.5 billion price tag, making this the first test of whether Ballmer can spend his way out of Microsoft's valuation discount.
- Skype stops being an independent suitor: the rumored Facebook and Google talks die, and Skype's roadmap shifts to Microsoft surfaces — Xbox, Outlook, Windows Phone and Lync per the companies' statements.
Second-order effects
- Bloomberg flags the awkward fallout: a deeper Microsoft-Skype video-calling push may strain relations with AT&T and Verizon, whose networks stand to lose minutes to VoIP riding on Microsoft's devices and services.
- Facebook and Google, having reportedly circled Skype themselves, must now decide whether to build competing voice/video capabilities or partner around the very asset Microsoft just locked up.
Third-order effects
- The price sets a benchmark for what ecosystem owners will pay for installed communication networks — treating a free-calling user base as strategic infrastructure rather than a standalone business, an instance of capability acquisition over revenue math.
- A purchase of this size puts the deal in front of antitrust regulators on both sides of the Atlantic before any integration proceeds, adding a regulatory gate between signature and strategy.
The trend: Consumer communications networks are becoming strategic acquisition targets for platform owners willing to pay well above conventional valuations to embed them in their ecosystems.