Home > Computers and Internet, News and politics > The Microsoft Skype deal smells fishy to me

The Microsoft Skype deal smells fishy to me

Today it was announced that Microsoft is purchasing Skype for $8.5 Billion. That’s a lot of money. That’s too much money. The different reasons that Steve Ballmer gave for the purchase (enabling communication for different Microsoft products) don’t fly with me. The reason is because every reason given works just as well for putting Windows Live Messenger onto those product. Skype doesn’t do anything that Windows Live Messenger doesn’t do. One of the possible reasons floated was to get users, but in both registered users and active monthly users WLM has at least three times the number of users. Assuming that all of active Skype users aren’t active WLM users that’s still a decent growth in the customer base, but $8.5 Billion worth? I don’t think so.

Skype’s not even a profitable company. Skype is losing about $70 million anually and has about $800 million in debt. So that tacks on a minimum of $1 billion of additional cost.

One of the other reasons given was that Microsoft has foreign money reserves that won’t bring into the US. Fine, but did it have to get spent this way? The other bidders for Skype were Google and Facebook and they were bidding a little above $4 billion. Why did Microsoft double all existing known bids? Was Microsoft afraid that a competitor was going to get a hold of a failing company?

To me, this deal reminds me of the phrase “McDonald Douglas purchased Boeing with Boeing’s money”. Right now Skype is owned by two venture capatilst firms, who also happen to own shares in Facebook. While there is Facebook/Windows Live integration, perhaps the venture capatilsts felt that Skype would lose money if Facebook got it, but Facebook could profit it from it, if Microsoft had it. But how did they get Microsoft to buy it? I feel that there’s somebody on the board, or who can put pressure on enough of the board, who made this deal happen.

Skype was purchased for $2.6 Billion in 2003. What has it done to deserve such wonderful evaluation since then? AFAIK it’s user base hasn’t grown, and it’s only been losing money since then. This deal really smells like somebody realized they were losing money because of Skype and were able to Microsoft to pay them handsomely for it.

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