May 11, 2011
Can Skype Help Microsoft Find a New Calling?by J. Max Robins
Microsoft's stunning $8.5 billion acquisition of Skype certainly begs the question: Can the software giant successfully integrate an operation that is truly antithetical to its own culture? It may be far from a sure thing, but I think the giant from Redmond, Wash., has a shot. The conventional wisdom is that Microsoft overpaid. But that hefty price tag may make sense given Microsoft's needs and the value Skype may bring over time.
Wise champions of innovation are bemoaning the deal, given the company's spotty record of making acquisitions work within its culture. On his blog, Union Square Ventures' Fred Wilson lauded Skype and its innovative founders Niklas Zennström and Janus Friis for bringing video calling to the masses. He echoed the views of many in the tech community by calling the acquisition a disappointment and doubting that "Microsoft will do something great with Skype." A friend of mine at a major telco said he felt like popping the Champagne when he heard about the Skype sale, "because Microsoft is sure to screw it up like it's done with about everything else in telecom." A testy "Heard on the Street" column in the Wall Street Journal employed standard earnings analysis and gave the acquisition a big thumbs-down.
Since its launch, Skype has been predicated on an ethos of openness, making its technology available across platforms. Innovation has been key to building the company. To say the least, massive Microsoft operates in a much different manner. "Multiplatform" is hardly the mantra at the Redmond campus. Often the company seems to lumber along, enjoying huge market share with its Windows products that appear outpaced by innovation elsewhere.
This isn't to say that Microsoft hasn't shown the ability to innovate and reach the consumer with new products. It may have taken six years to get Xbox right, but eventually it did, and millions of Xbox owners worldwide agree.
Perhaps what we're seeing in the Skype acquisition is the Microsoft of Xbox, not of Zune, Microsoft’s sputtering play into the digital music space. Marry Skype to Kinect, Microsoft's motion-capture technology for Xbox, and you've got one kicking mainstream telepresence product. Skype brought VoIP to the masses in an elegant manner -- closing in on 700 million users worldwide is no small feat. It's not just a magnificent brand name, it's a verb!
People who've been part of any Skype beta test sing the praises of the company's research and development capabilities, calling its Estonia-based developers "world class" and on par with those in Silicon Valley. Well, they work for Microsoft now (and we all know Steve Ballmer's famous appreciation for developers). If the company can embrace that culture and let it inject new life into the technology behemoth -- and that's a big "if" -- then the Skype acquisition could truly be a transformative thing.
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