The acquisition of Skype marks a strategic shift from the core Windows business to the internet, communications, entertainment and other areas Microsoft is facing in order to meet its own challenges, and hope to regain its former glory
Although the audacious purchase and lead to high bid doubts, in order to blaze a trail in the competition, Ballmer at all.
Recently, Microsoft CEO Steve Ballmer announced that it will buy Luxembourg-based Internet Telephony service provider Skype for $ 8.5 billion. It was Microsoft's biggest acquisition in 36 years.
Under the deal, Skype will become Microsoft's new business unit, headed by its current CEO, Tony Bates, who will report directly to Ballmer.Ms. Bates said Microsoft and Skype share a common vision for software and product innovation, and " both will accelerate Skype's global expansion plans."Mr. Ballmer believed that the acquisition would generate profits for Microsoft in the first year after it was completed.
In the outside world, Microsoft's huge stake in Skype demonstrates its ambitious intentions. The Seattle-based software giant claims that the acquisition of Skype will support a range of Microsoft products such as Xbox and Kinect gaming platforms, the WindowsPhone mobile operating system and the Windows operating system, giving the company new development opportunities.
In recent years, Microsoft has been trying to reverse its unfavorable situation in the field of internet and mobile. Still, Wall Street investors are cautious about Microsoft's high-priced acquisition strategy. Microsoft shares were down 0.62 percent at $ 25.67 on the day of the announcement.
Too generous?
Founded in 2003, Skype has more than 170 million active users, but profitability is difficult. Last year, the company's revenue reached $ 890 million, with an operating profit of $ 264 million and a loss of $ 6.9 million. By the end of last year, Skype was still saddled with $ 686 million in long-term debt.
Skype had originally planned to go public in its IPO last summer but was delayed by a profit model that did not impress investors. The company's efforts to turn free users into paying customers have stalled. According to regulatory filings, the number of registered users of Skype rose 104 percent from 2008 to 2010, but the average monthly payrolls increased only 52 percent to 8.8 million.
Skype has been up for grabs. In 2005, eBay bought the company for $ 2.6 billion, after failing to achieve the original goal of integrating Internet communications and online shopping to make a profit, eBay former CEO Meg·Whitman in 2009 for $ 2 billion will be sold Skype equity 70% to private equity Silver Lake.
Rumors in the industry that repeated delays in the IPO made both Silver Lake and eBay lose patience, while the long-term operation is not profitable, forcing Skype to find a strong backing. Speculation about its sale has been rampant for months. While Facebook, Google, and Cisco have all expressed interest in Skype, Microsoft is the most determined buyer, people familiar with the matter said.
Prior to that, Microsoft's biggest acquisition was in 2007, when it bought American online advertising company aQuantive for $ 6 billion. However, Microsoft's integration of its business has not been smooth. Most of Quentin's former executives resigned from Microsoft.
Microsoft has been cautious over the past few years, as many of its big acquisitions have failed to deliver results. In 2010, Microsoft made only three minor acquisitions. The $ 8.5 billion acquisition of Skype by Microsoft may indicate that the company's executives have regained confidence in the smooth integration of external companies, Wired magazine said.
Industry sources pointed to Microsoft's use of Skype as an independent unit rather than as part of an online business, suggesting that Microsoft is learning from past failed acquisitions.
In fact, the acquisition shows Microsoft's eagerness to acquire growth opportunities, especially in the mobile phone and internet markets. The Times writes that Microsoft is betting on a major trend-and believes users around the world want to be able to keep in touch with other people at all times, at no cost.
But Mr. Ballmer's $ 8.5 billion checks drew criticism from critics who said Microsoft's offer was too high and questioned the logic of the deal, as Microsoft's acquisition price was 32 times that of Skype's earnings before interest, taxes, depreciation, and amortization last year. Microsoft does need to explain why Skype is worth the price, and how it will pay back shareholders, “people are concerned about valuations, not revenues and profits,” said Jim coughed Forrester, senior analyst at FortPittCapitalGroup.
The battle between the Giants
Right now, most of Microsoft's profits still come from revenue from Windows and Office software. By rivals such as Apple and Google, Microsoft has made little profit in other areas. However, Mr. Ballmer is already convinced that internet communications will be a battleground for future industry competition.
Mr. Ballmer said that in recent years, communications technology has been the“backbone "of Microsoft's business growth, and Skype has built up a solid communications business," now the communications industry is changing rapidly, we will be outside the field of e-mail and text messages, providing users with a communication experience beyond distance or device restrictions."
Optimizing Skype's services among Microsoft's products means many significant opportunities. Previously, Microsoft already has the internet voice service Lync, Lync e-mail, timely information, and voice communications services integrated into a single program, but the service is mainly for enterprise users. After the acquisition of Skype, Microsoft can use Skype and Kinect, the consumer video market against Cisco and other competitors.
Not only that, but Microsoft also hopes to accelerate the use of Skype to reverse its lonely fate in the mobile phone market.
Market research firm ComScore said in March, Google Android became the United States's first mobile operating system, occupy nearly 35% of the market share, Apple accounted for 25.5%, while Microsoft's WindowsPhone operating system accounted for only 7.5%. Microsoft launched the WindowsPhone7 mobile operating system last year but has not materially changed Microsoft's market position.
If the WindowsPhone system integrates Skype or can help Microsoft in the new era of internet communications to win a more favorable position. Only a few months ago, Microsoft seemed to be in danger of being marginalized in the mobile internet age, but Skype could immediately make Microsoft an important competitor in the mobile market, said Sujit Jha, head of consulting firm AltmanVilandrieCo.
A few years ago, Google and Apple have begun to layout the internet communications field. However, the two companies have a common problem, that can not be applied to rival platforms. And Skype can run on a variety of systems, also supports Android and Apple and other mobile platforms, and even run on TV. Paul Pescatore, an analyst at research firm CCSInsight in London, said the deal would give Microsoft the tools it needs in the communications market, with Skype being the industry's benchmark for voice services.
The takeover deal is like a massive defensive battle. Microsoft is taking action to stop Google taking a bigger advantage in Internet communications. Rob Enderle, the principal analyst at Enderle Group, A US market research firm, believes Microsoft's acquisition of Skype is not only to boost its business, but also to prevent it from falling into Google's hands.
Still, some investors complain that Microsoft's acquisition of technology may soon be overtaken. Patrick Becker, president of Becker Capital, worries that after Microsoft took the time to integrate Skype, the device performance will be surpassed by Google and Apple.
In addition, Skype may cause dissatisfaction of mobile operators. The tool allows users to connect via Free Data calls, rather than the traditional voice connection mode, you can avoid the operator's high fees. Microsoft's acquisition of Skype must ensure that the relationship with the operator partner does not deteriorate.
To drive sales of smartphones, Microsoft is urgently needing support from mobile operators. Gartner analyst Berne Elliott said the acquisition may further exacerbate tensions between the two sides. However, Mr. Ballmer said it was important for operators to help, and he saw the enthusiasm of some telecom operators for the deal.