Confirmed: Microsoft buying Skype

Some early reports have Microsoft aquiring Skype for $8.5 billion.
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If true, this continues Microsoft's pattern of buying into market segments where they have no presence. The trend started with their hotmail acquistion. Recently, they paid Nokia over $1 billion dollars to begin scrapping their Symbian cell phone OS in favor of the Windows cell phone OS. Just before that, they pressured Yahoo to "join" Bing, or die.

Skype has enjoyed success because it was a first to market service. They offered value to users for free (skype-to-skype video calling) or for low cost (skype-to-real telephone voice calls). Ebay found this business model difficult to monetize, and ended up selling it to a group of private investors for $2 billion, losing $600 million in the process. Analysts are wondering how Microsoft will recoup this new high purchase price. Comparing this sale to the last sale is a high factor: (2 billion * 4.25 = 8.5 billion). No matter how you slice it, 425% is a high scaling factor. Perhaps, the price climbed that high due to Microsoft winning a bidding war with Facebook. I saw some rumors last week that Facebook was trying to buy Skype for $4 billion. The question remains of whether a change in business model is in the offing to monetize this Skype investment. Will they begin charging for calls? That seems to be a difficult prospect in the crowded VoIP market- consumers have a lot of options, including Google Voice. Skype has had the advantage of better voice quality, and now consumers may be asked to pay for it.

First Update:
Slashdot finally picked up the story. Better late, than never. Their coverage points to some articles which question whether the new owner will have the same commitment to non-MS platforms. This change casts a serious pall over the Linux version of Skype. The pundits are predicting it will be left to wither on the vine, if not killed outright. I hope that isn't true, because I like Skype on Linux. If their strategy was to further entrench their Windows OS, then they should tread lightly. One potential unintended consequence that MS may not have anticipated is that Skype is a market leader, but hardly the only game in town. If users dump Skype, then a significant number would move to arch rival's product, google voice. A mass exodus is certainly a possibility if/when MS tries to change the rules by upping calling rates, and/or dropping support for other platforms. GV alreadly offers some attractive features. The only thing holding it back is its less than stellar call quality. If its implementation was slightly better, then it could compete easily with Skype. GV has one very nice feature: it offers to assign a "real" phone number. That real phone number can act as a gatekeeper for the myriad of numbers that people are likely to have (home phone, cell phone, office phone, etc.) Google's recommendation is to publicize your GV number, and then it will automatically forward incoming calls appropriately. It "finds the person," and just works with whatever device the user is currently using (real telephone, cell phone, computer, etc.).

Update: 2011-05-13
Some people (Brooks, Vaughn-Nichols) think $8.5 billion is a high price, especially since Microsoft is supposed to be able to write their own software. Apple rolled out FaceTime with no trouble. The linked articles question whether Microsoft's primary motivation for buying Skype was simply to stop other people (Facebook, Google) from owning it, and maybe, possibly doing something with it. Like I said, 4.25 times the last sale price is so high, it's beyond the moon.

Update: 2011-05-25
Slashdot reported yesterday that the cuts to other platforms have begun. They cited that Asterisk support for the open source software/hardware platform for building PBX is first on the chopping block.

After Tax Vote, Ballmer set to cash out.

Here is my blogpost, hosted on another site.

The Exodus at Microsoft

I saw this link to an interesting blogpost on the front page of Slashdot yesterday.

OK, you say that's just small fry, but you've got to take notice to this story that appeared later in the day.

Ray Ozzie, chief architect of Lotus Notes, hired away from IBM by Microsoft is now "leaving" the post of "Chief Software Architect." As I understand the Microsoft culture, they are very fond of the quote from Treasure of the Sierra Madre, with an alternate predicate. I am sure they are all roaming the campus, "We don't need no stinking Chief Software Architect." It will be interesting to see if he was forced out, or if Ballmer thinks he can pilot the ship himself. Get ready for more Zunes and more Kins.

Update: 2010-10-26Ray Ozzie asks Microsoft to think about life in a "post-PC" era.

BSA to EU : Kill Open Standards

This again is remincient of the "Knife the baby" tactics which Microsoft (now puppet BSA) are so very famous for.

Here is Slashdot's
headline

Here are the fsfe's arguments against BSA

Microsoft, the new IBM (minus the big iron)

Steven Vaughan-Nichols has an interesting take on the current realities at Microsoft. This echoes what I wrote in my blog here, that Microsoft's current culture may be too slow to adapt to changing market realities. The standard rule at Microsoft, "three tries to get it right" just doesn't cut it anymore. They did get Windows 7 out the door, but it's really a minor paint job over XP- just something to keep the monopolist's cash rolling in. Instead of all that wasted effort, they could have sold annual subscriptions to NT4, allowing "kernel" upgrades to Windows 2000, Windows XP, etc. Instead, they stuck with the sales/development model that they had chosen- the mind numbing choice of versions and the labyrinth at the heart of software assurance. It's hard to argue with success, but the money in technology can be a firehose or a dry creek bed. Where's WordPerfect's revenue stream now? Where's Novell's? The market moves on. Distractions, like marketing a new paint job for the OS every three to five years takes the eye of the ball- and doesn't lead to an overall market strategy. You can argue that monopolists don't need a strategy- that the money will just keep rolling in. That hasn't been the rule of thumb in technology so far. So far the repeating pattern is this: one company invents a killer technology and builds a dynasty around it; they continue to milk their cash cow- raising prices all the way. That leaves to door open for another new technology to come in to disrupt the status quo. Inevitably, the next company follows along the same track. Gates/Ballmer were powerless to prevent becoming the next IBM. Big companies are big, and carry a lot of inertia. It's hard to tell the guys with all of the money that they're just flat out wrong and on the wrong track. The Vaughn-Nichols article places blame at the top, and calls for Ballmer's ouster because that is where considerable mass/inertia is centered.

To be sure, all the tidal forces are going against Microsoft. Consider their slow release cycle, their high prices, their inflexible contracts, their limited platform, their 100,000+ Windows viruses, and (most of all) their stodgy leadership. Customers don't like high prices, especially when they are set arbitrarily high in order to meet the monopolist's agenda. Luckily, Linux was there to step in as a worthy replacement- winning jobs from supercomputers to Rokus, Tivos, and Androids. Microsoft's payroll is large; start counting the days until layoffs.

Windows CE vs. iPhone, Android
I haven't been a big Apple fan, but you have to give it to them for delivering products that people want and will pay for. A big part of Apple's success was that when Job's came back from hiatus, he had the courage to pull the plug on the stalled project to upgrade the Macintosh OS- the Copland project. This was replaced by Rhapsody which leveraged open source development and led to their successes with OSX and the iPhone. Android also leverages open source and doesn't have the monopolist's hardware lock in. Plus, with Android you'll get multitasking because it's Linux at its core. Compare this active development to the stalled "ecosystem" at the heart of Microsoft's handheld OS, Windows CE.

Update: Microsoft pulls the plug on part of their "shotgun" strategy and kills the KIN. Microsoft's successful products continue to fund a bunch of losers. Their philosophy seems to be if you put enough bb's into the air, a few will hit something. Good luck with that. Keep loading the shotgun and firing blindly.