Microsoft – taking consumer value to the next level?

In recent weeks, Microsoft has closed an $8.5 billion deal for Internet phone service Skype, marking its place in the aggressive competition in the voice over Internet protocol market.  

This deal will be a serious blow to its two main competitors –Google (Google Voice Service) and Apple (FaceTime, which is attempting to be the killer app of the iPhone 4).

The video and talk services that Skype offers users are largely free, and there is a consensus among industry experts that Microsoft will retain this business model.   Microsoft has an existing customer base among small and medium-sized businesses and is historically strong in the business market, so has a ready-made opportunity to make far more of a commercial Skype service than the company managed on its own. 

However, many analysts believe Microsoft will use Skype as a means to break into the consumer market further.  This makes perfect sense as, increasingly, technology changes start in the home and move to the workplace.  Skype could be integrated into existing Microsoft products such as its Xbox 360 games console and Kinect gaming systems, or even into its flagship Office product to let users collaborate more effectively.

So is it really worth $8.5 billion?  The answer is no – unless you’re Microsoft. 

"Skype is a phenomenal service that is loved by millions of people around the world," said Microsoft chief Steve Ballmer. "Together we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world.”

Skype is -and was - more valuable an asset as part of a larger entity.  Microsoft already has its own similar technology (Instant Messenger and Lync), so it’s not about the technology, it’s about those hundreds of millions of extra users that Microsoft can seek to monetise, and enhancing the experience of paid-for Microsoft products (such as Office), and the fast-growing and crucially important Windows Phone division.

  http://www.guardian.co.uk/technology/2011/may/10/microsoft-skype-deal-shocks-analysts?INTCMP=SRCH
  http://www.zdnet.co.uk/news/mergers-and-acquisitions/2011/05/10/microsoft-buys-skype-for-85bn-40092728/