
Why Microsoft bought Skype - evo_9
http://www.cringely.com/2011/05/why-microsoft-bought-skype/
======
fauigerzigerk
I don't believe that at all. Google doesn't need Skype. Microsoft bought Skype
because they have large amounts of cash in Europe that they cannot repatriate
without taking a huge tax hit. For some strange reason, Ballmer has that
obsession with hyperactively pursuing the same consumers that Google and Apple
have. That's why he didn't see anything else to buy in Europe (Actually there
isn't a whole lot).

But there is something: SAP. What Microsoft should do is take on Oracle and
IBM instead of Apple and Google. They should make an offer to that large
number of companies who want one thing more than everything else: Peace of
mind based on an integrated stack. They are ready to pay up. Microsoft is the
master of integration (some call it lock-in). Together with SAP, Microsoft has
the most complete enterprise stack imaginable. All of a sudden even Windows
Phone would have a place in this world as a BlackBerry successor.

~~~
gfodor
I agree with this wholeheartedly -- Microsoft's fatal error was assuming they
would continue to be the dominant force in both consumer and enterprise
computing. They still own the enterprise. Why they aren't happy with this and
focus on taking steps to ensure their dominance there for the next decade is
beyond me.

~~~
contextfree
They think that what's popular with consumers will eventually make its way
into enterprise. Or in other words, their consumer efforts _are_ the steps
they're taking to (try to) protect enterprise dominance in the long term.

~~~
raganwald
You might have something there! A few years back I wondered if enterprise
software was experiencing a disruption because of the way user expectations
were being set outside of the company:

[http://weblog.raganwald.com/2007/09/we-have-lost-control-
of-...](http://weblog.raganwald.com/2007/09/we-have-lost-control-of-
apparatus.html)

Maybe Microsoft sees this they way you suggest and believes that by
controlling the consumer experience, they will also control the enterprise
experience. For example, if they control the dominant VOIP consumer
application, their tools can dominate enterprise-VOIP integration.

I don't know if they have the management moxie to pull it off, but I think you
may be right about what they're trying to do.

~~~
contextfree
Yeah, this isn't my speculation, it's how Ballmer and others have been
publicly justifying their decision to continue targeting both consumer and
enterprise instead of splitting up into two companies or dumping the consumer
side.

------
ghshephard
Skype is the google of VoIP. I recently travelled to Brazil, and needed to
make free calls to our US 1-800 number (vs R$18/Minute for the phone in the
Blue Tree Marumbi in São Paulo). I had used google voice as a test a few
months ago, and spent the better part of 5 minutes trying to figure out how to
do it again - but failed - and I'm obviously highly technical. That suggests
to me that 95% of your average community of people would not be able to use
Google Voice, as it stands today, to make a phone call from Brazil to the
United States.

Skype, on the other hand, made it numbingly obvious and about 2 minutes after
typing "skype.com" I was making free international calls to US 1-800 numbers.

Purchasing Skype for Telecom is like purchasing Google for Search. You
basically will be purchasing the market segment at this point. Lots of good
reasons.

And $3.00/Month for unlimited calling to the United States - Wowza! Lots of
room to grow fees there. :-)

~~~
sek
Why did you fail with Google Voice? You pay and then you call a number, what
is the difference?

~~~
ghshephard
Have you called The US from Brazil? They had some geolocation filtering that
either made it complex or impossible to make a voice call. Not at all like
using it from the united states.

------
bambax
> _Microsoft bought Skype to keep Google from buying Skype._

Except Google wouldn't buy Skype, according to a recent story:
[http://edition.cnn.com/2011/TECH/web/05/11/google.skype.wire...](http://edition.cnn.com/2011/TECH/web/05/11/google.skype.wired/)

...?

~~~
nikcub
ye, this guy is wrong there and in about a dozen other places in this article.
notice that you can read all of this and not acutally _learn_ anything.

welcome to 90s era tech punditry

------
cletus
Am I the only one who has had terrible experience with Skype?

I live in New York but my family is from Australia so I use video-calling them
to them all the time. I've tried using Skype but basically it's terrible. Poor
audio, choppy frame rates and at some point it will start giving messages
about "degraded performance" and we'll lose video.

My setup is a 50Mbps cable line using wireless (N) from a Macbook Pro. The
other end is ADSL of varying degrees (1.5 to 10Mbps) on wireless (N) from a
Windows PC or laptop.

We've basically given up on using Skype.

What works flawlessly and with much higher quality? Facetime.

Am I really the only one who has had terrible experience with Skype?

My point with this is that Skype is not the dominant video medium it once was,
especially not from a technical standpoint.

What's more, video calling is becoming a commodity. I think we're near or
above 100M Facetime-capable devices (iPhones, iPod Touches and Macs). Google
Talk is available to however many millions of GMail users are out there.

Skype isn't even a strong business (IMHO). Most consumers don't pay, which
leaves the business type users who use multiway calling I guess. But where p2p
video calling is becoming commoditized, who's to say multiway calling won't
quickly follow suit?

Basically, $8.5B for Skype is nuts.

It seems the one who really needed to buy Skype was Facebook who have no video
calling to speak of. One wonder if Skype was "the last piece of chocolate
cake" syndrome, meaning you want something you otherwise wouldn't just because
it's the last piece.

~~~
barrkel
Australia has small and expensive pipes to the rest of the world, and it shows
up as caps and high prices. I'd be surprised if Australian telcos weren't
working hard to degrade VoIP generally.

For my own part, I use Skype for almost every outgoing phone call. I spend
perhaps 5 GBP/month on threshold auto-credit. The biggest problems with it
happen with concurrent upload activity, especially torrents.

~~~
cletus
This was true 10 years ago but a lot has changed and it's fairly damning
evidence of just how much the US has stood still on Internet access in the
last decade.

Consider iiNet, Australia's third largest ISP:

<http://www.iinet.net.au/broadband/plans.html>

200GB/month ADSL2+ for $50/month (+$30/month "phone tax"). In NY I have Time
Warner Cable 50Mbps but it's basically capped at 250GB and I think I pay
$80/month for it.

But there are three important advantages Australia has in this regard:

1\. The caps are known and advertised. In the US they are far more
surreptitious;

2\. You get what you pay for. If you pay for 200GB, you get 200GB. There is no
hiding behind "fair use" or nebulous definitions of "unlimited". This also
means that a low traffic user can pay as little as $30/month for their ADSL2+
connection. Nor do you get labelled a bandwidth hogged and get transferred to
some incredibly oversubscribed network if you dare to download (common
practice in the UK); and

3\. If you wish, you can pay for and get 1TB+/month. Where I am, my only
choices are TWC and crappy ADSL1 providers. If I wanted >250GB/month I
couldn't get it.

And all this is the current system. Australia is in the early stages of
rolling out FTTH (fibre to the home) for ~95% of the population with
structural separation between providing wholesale and retail services.

So I wouldn't be too quick to crow about Internet advantages in the US over
Australia (or anywhere really).

~~~
Raphael
But if the overseas pipes are the bottleneck, improved local infrastructure
would mean more are fighting to use them.

~~~
mambodog
This is not the case. barrkel's statement is outdated and inaccurate.

 _"Each of the four networks that will be providing the bulk of international
connections for Australia is capable of carrying at least a terabit per second
of data. The total international capacity in use for the Australian market in
2009 is estimated to be around 300 gigabits per second. Accordingly, total
capacity usage could double, then double again, then double again, and then
double yet again before the capabilities of those networks was exhausted. It
would therefore be difficult to say that international networks are a capacity
bottleneck in the Australian market."_ [1]

Another cable link currently under construction will double Australia's
current capacity. [2]

[1]
[http://www.computerworld.com.au/article/358578/nbn_101_float...](http://www.computerworld.com.au/article/358578/nbn_101_floating_submarine_cable_question/)

[2]
[http://www.techworld.com.au/article/354838/aus_network_bandw...](http://www.techworld.com.au/article/354838/aus_network_bandwidth_doubled_400m_deal/)

------
mcantelon
Tldr: Cringely believes Google is the next Microsoft. Microsoft is worried
about its future and bought Skype so Google wouldn't buy Skype. Cringely
believes Apple, however, is a magical unicorn that Ballmer cannot even
comprehend.

~~~
shareme
Cringely is wrong again.. read Steve Levy's GooglePlex take on it..Google
Passed on buying Skype not once but twice..

~~~
Hawramani
That doesn't rule out the existence of third offer. Just saying.

------
jkaljundi
Today Ballmer made a full day visit to the Skype development HQ in Tallinn,
Estonia.

He also met with the President of Estonia:
[http://www.president.ee/en/media/press-
releases/6096-preside...](http://www.president.ee/en/media/press-
releases/6096-president-ilves-met-with-ceo-of-microsoft/index.html)

It's interesting that while Microsoft-related Nokia in Finland is decreasing
headcount, the southern neighbor Estonia's Skype is looking to potentially
grow.

~~~
dotcoma
Skype is now worth almost 50% of Estonia's GDP.

------
lurker20
Here is what Microsoft should do with Skype and it's 140Million-member _social
network_ :

Beat Facebook. Turn Skype into Diaspora. (Specifically, take Skype's
persistent chatrooms into the next dimension)

Integrate Skype with Windows Photo Album, Movie Maker, Spaces, blah blah.
Mayke Skype a _local_ application for managing your personal content --
photos, videos, thoughts, whatever.

Leverage Skype's encrypted P2P infrastructure to make truly privacy-protected
social networking. Automatically send status updates and comments and stuff to
a user's friends over the Skype network.

Make social network truly social, and not dependent on a central server.

Monetizations: * ads in the the client software * for-pay special privacy
settings for business/paranoid: __An Enterprise version that runs inside a
private (corporate) network, with centralized IT authority. * For-pay
broadcast-type features for self-promoters. * For-pay "professional" and other
custom front-end for more specifically-structure communities than Facebook's
free for all pseudo-"Friend" relationship.

Let users import/export their data between Skype and other network and blog
systems.

Skype could displace Facebook, making social networking better for everyone,
and rain money on MS.

~~~
joe_the_user
Wow, that's a great idea for a company that users trust.

If only a company like that had bought Skype...

~~~
stcredzero
_Wow, that's a great idea for a company that users trust.

If only a company like that had bought Skype..._

The thing is, Microsoft only has to get people to trust them as much or more
than Google, Facebook, Sony,...

------
mcantelon
According to Cringely "Apple has no peer". I guess that depends on how you
look at it. Apple's execution is unparalleled, but the broadness and
disruptive nature of Google's strategy is hard to deny. The new Android Open
Accessory Development Kit strategy, for example, is something I'd never expect
to come from Cupertino or Redmond.

~~~
slowpoison
Apple did announce the APIs for iPhone accessories a year or so back with iOS
3.0. Scope and traction of Google's and Apple's specifications/APIs might
vary.

------
itgoon
MS v. Google? v. Apple? After reading this, and the comments, and a little
thinking about it, the more this makes sense.

MS has a clear weakness in its lineup. Skype brings a bunch of existing
technology and know-how, not to mention all those sweet, sweet users.

Multiply by some factor of Ballmer being an idiot, and 8.5 is almost
reasonable.

Part of what convinced me - and I realize HN comments are anectdotal - was
people's impressions of Skype and Google Voice (I've done no more than played
with each).

From the sounds of it, Skype's biggest issue is its UI. MS has plenty of
experience (and some success ;) with good UIs and backend work.

Other than that, it satisfies its basic function well: it makes the calls. It
sounds like Google Voice, at least internationally, isn't as straightforward.

So, they get the users, and a jump on the tech. Okay, decent, but not great,
business decision.

Will they turn it into something successful? Ehhhh, I have my doubts. Who
knows? Ballmer isn't actually an idiot; maybe he's learned something by now.

*Edit - spelling

------
stcredzero
_And the $8.5 billion price? That was effectively set by Google, not
Microsoft. Ballmer would have paid anything for Skype. $8.5 billion is just
the price at which Google feels it is better for them to build rather than
buy._

That's not really 8.5 bil for Skype. The cost to develop that would be a lot
less. That's actually 8.5 bil for 140 million active users. That's about $60 a
head. Not a bad deal for a big company in the telecom/mobile hardware space.

------
soofaloofa
> _Apple is not the next anything because the role it aspires to transcends
> anything imaginable by Microsoft, ever._

Really?

Both are publicly traded companies whose role is to make money for
shareholders. I don't see how it's possible to transcend this.

~~~
AllenKids
In related news Einstein failed to transcend homo sapien

------
rndstr
> In the end Apple will probably beat both Google and Microsoft, but that’s
> not a story for today.

Alright, I stopped reading there. Unfortunately, it was too late.

------
zmmmmm
I can't agree with this. The basis of it all doesn't make sense:

> Were Google to buy Skype ... they’d build a brilliant Skype client right
> into the DNA of Android

Google has had loads of opportunity to build VOIP functions into Android and
has dragged their feet all the way. They already have a a voice chat service
and it has no presence in Android (edit: yes, just now they released video
chat, but only for a tiny percentage of phones). The latest versions have some
SIP functions but it's clearly been kept obtuse enough to prevent any mass
consumer take up. Google is heavily constrained by needing not to offend the
carriers. The idea that they would en masse integrate something that would
destroy their business models is delusional.

------
sek
"First they ignore you, then they ridicule you, then they fight you, then you
win."

We didn't hear much ridicule from Ballmer in the last months.....

------
coffeedrinker
Microsoft is weak on social network, and Skype could be a first step to fixing
that.

Skype offers a great foundation for social because the contacts it contains
are often better ones than Facebook offers.

By adding to components to what already has an entrenched base, Microsoft can
leap forward without trying to "break into" the established market.

~~~
officemonkey
>the contacts it contains are often better ones than Facebook offers.

Really? That's not my experience. The contacts I have on Skype are the people
I call from my computer, not all my friends.

For instance, I don't call my coworkers from Skype, because all their numbers
are on my cell phone. I don't call my close friends, because al their numbers
are on my cell phone.

In fact, the only contacts I have on Skype are the out-of-town people I video
call (my parents, my sister, my niece) and the places I order food for
delivery.

------
VladRussian
strangely, to me Skype deal looks like Storagetek:

1.obsoleting technology (Skype's power is Internet (typically PC, not mobile
device) to "real phones" only enabled endpoints - this power is diminishing
with communication networks growing today in any other segment except the
segment of "real phones"-only enabled endpoints)

2.and commoditization of the rest of their technology - i.e. speech and video
over Internet, and their technology not even being better

3.and no noticeable presence in disproportionally growing and more numerous
segment of devices - mobile

The Skype was just becoming a niche player (in its old niche) and one among
many in the rest of the telecom world.

------
megaman821
He sure has a lot of confidence on how successful Google would be with Skype
but that doesn't really jive with reality.

Google's only successful home grown products are Search and Gmail. Android and
Youtube are the most successful acquisitions. Voice, Double-Click, and
Analytics are doing ok, and then there are about three dozen failures. It is
ok to fail but people shouldn't pretend everything Google touches turns to
gold. Skype probably has just as much chance as succeeding with Microsoft as
it does with Google.

------
movingahead
I think Microsoft will leverage its relationship with facebook and use skype
as their alternative to apple's facetime. Though I am worried about the future
of Skype's linux client.

------
mitultiwari
Skype+Kinect+xbox can bring video calling to living room. Also, Skype could be
a great addition to Windows mobile phones. I think these two might be the main
reasons for Microsoft to buy Skype.

Now depends on how well Microsoft does Skype integration with their products.

------
Facens
The reason behind this acquisition is signaling to the market, and to
Microsof's competitors, that MS is still strong and wants to play as a leader
in the market. This acquisition is not justified by business reasons, it's a
matter of game theory ;)

------
sshah
there are talks about skype integrating with television sets. Think its LG and
more to come. Xbox sits next to that tv and is one of the successful products
in it's stack. maybe msft wants to be part of your living room?

------
VB6_Foreverr
He's expressing an opinion except his style is to state his opinion as fact
without providing any evidence at all.

It's not worth reading.

Now if he had predicted this purchase, that would be different.

~~~
jodrellblank
It should be the default understanding that what someone says and writes is
their opinion.

Not having that as the default is how we ended up with the terrible popular
style "in my opinion it could be argued that for some people it is mostly
better if they XYZ, where possible (consult your doctor)".

NB, when I say it's a terrible style, that's my opinion, not a universal truth
or peer reviewed fact cited in a published journal.

See?

~~~
macrael
I'm not so sure. I agree that weasel words can destroy a piece of writing, but
a complete lack of them can come off badly too. The main effect of killing the
qualifiers in your writing is increasing the confidence in the tone of the
piece. Obviously, we all have different levels of confidence in our many
different opinions, and if you stop using qualifiers all together, you lose
the ability to distinguish between different points on the confidence
continuum.

If I write with the same confidence about two opinions I have, one I am vey
sure of and one I am doubtful about, then I have failed to communicate well.
Furthermore, writing in a way that expresses complete confidence in your
opinions can change the tone of the conversation that it sparks. When you
qualify your opinions, you signal that you are more willing to discuss that
point. Speaking with complete surety can shut down a comment thread or turn it
more antagonistic.

~~~
jodrellblank
I like your point that the author can assign different levels of confidence to
different parts of their writing, but the reader shouldn't automatically
mistake the confident sections for facts and the unconfident sections for
falsehoods, that seems to be conflating two signals into one.

 _When you qualify your opinions, you signal that you are more willing to
discuss that point. Speaking with complete surety can shut down a comment
thread or turn it more antagonistic._

OK, I can see that happening.

------
javabuddy
This is another attempt of Microsof to compete Apple and Google after tieing
up with nokia for Windows Mobile phone.

