Microsoft’s marriage to Skype dissected

Microsoft’s $US8.5 billion acquisition of Skype is likely to prove a boon for the software company’s channel partners who would now be able to augment their existing offerings with voice and video capabilities as well as more sophisticated mobile solutions. 

Microsoft CEO Steve Ballmer said Skype is a part of Microsoft's plan to "empower people with new technologies that will bring them closer together." Skype fits in well with other Microsoft products like Outlook and its Xbox gaming platform. Skype's popularity is a big opportunity -- the Skype brand, Ballmer noted, "has become a verb."

On the subject of how Skype will translate into opportunity for Microsoft business customers, both Ballmer and Skype CEO Tony Bates were vague. Ballmer mentioned "value creation" and tying together Skype functionality with the company’s unified communications platform Lync. Bates said the business customer base that's strong with the Microsoft portfolio will be "taken to the next level over time."

Founded in 2003 by software developers and later owned until 2009 by eBay, Skype reported that it has some 170 million connected users and accounted for more than 207 billion minutes of voice and video conversations in 2010. Skype is seeing 40 percent growth in users year over year, and had 20 percent revenue growth year-over-year as well. 

Microsoft confirmed its acquisition plans for Skype earlier Tuesday. According to Ballmer, Microsoft made an unsolicited offer for Skype several weeks ago, and finalized the price on April 18. The deal was signed Monday night, and Microsoft will use overseas cash to pay for Luxembourg-based Skype.

Skype will become a new business division within Microsoft, titled Microsoft Skype Division, and Bates will become president of that division, reporting to Ballmer.

Ballmer and Bates did not address how Skype will be made available to Microsoft channel partners or any integration or product roadmap plans. There was also no mention of what happens to Skype's fledging partner program, which launched last fall.

"We're committed to the Skype user base," said Ballmer, who added Microsoft will work on continuing to build and increase that base, and also continue to invest in Skype on non-Microsoft client platforms.

In a later question-and-answer session, Bates dodged the question of whether Skype had other serious pursuers, saying Skype was "very focused" on its IPO and evaluated Microsoft as an acquirer after the unsolicited offer was made. Google, Facebook and Cisco were all rumoured to have been looking at Skype in recent months.

Asked about Skype's often tricky relationship with telecom carriers and service providers - with whom the service competes as a lower cost IP communications alternative - Ballmer said Microsoft's partnerships with carriers for its Windows Phone platform will remain "fundamental." 

The move is being viewed in the industry as a master stroke for Microsoft as it seeks to develop a more web-centric application story in response to Google’s recent overtures in the space.

Flick to the next page to learn how Microsoft may integrate Skype into its portfolio.