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Chronicles

The story behind the story

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Microsoft's Bill Gates says he advocated Skype takeover

Bill Gates says Microsoft's decision to buy Skype will provide better video conferencing opportunities  —  Microsoft's founder, Bill Gates, has said he advocated the company's takeover of Skype, and urged other board members to support the move.

BBC

Context & Ripple Effects

A week after Microsoft unveiled its $8.5 billion agreement to buy Skype and house it in a new business division, the story has shifted from price to politics: Bill Gates tells the BBC he personally advocated the takeover and pressed other board members to support it. That public endorsement lands on top of analyst scrutiny of what Microsoft is actually paying for — Cringely's post-mortem on why Microsoft bought Skype framed the deal as a bet on communications integration, not the standalone service.

Gates' intervention matters because the acquisition is CEO Steve Ballmer's largest ever and was widely read as a gamble at that price; syndicated coverage such as The Register's 'Gates defends Ballmer's Skype gamble' shows the debate is now explicitly about whether the founder's backing insulates Ballmer from criticism of the outlay.

First-order effects

  • Gates' public advocacy gives Ballmer cover on the $8.5B price tag at precisely the moment board-level skepticism over the cost is the main narrative around the deal.
  • Skype now sits inside a new Microsoft business division, with Gates framing the payoff as better video conferencing — setting expectations that Skype gets wired into Microsoft's products rather than run as an independent unit.

Second-order effects

  • Rivals in consumer and enterprise communications — Google, Apple, Cisco — face a competitor that can bundle voice and video calling into Windows, Xbox and Office at zero marginal licensing cost, pressuring standalone VoIP pricing.
  • Telecom carriers, whose paid long-distance and international minutes Skype already undercut, confront an owner with far deeper distribution than the startup ever had.

Third-order effects

  • If the pattern holds, communications shifts decisively from per-minute carrier billing to software platforms bundled by operating-system vendors, making ownership of the client — not the network — the locus of value in voice and video.

The trend: Voice and video communication is consolidating into platform owners' bundled services, with Microsoft's Skype purchase the clearest large-scale move in that direction.