Microsoft Buys Skype, What Now?

According to Bloomberg BusinessWeek, Microsoft will be acquistioning the world's most popular Internet calling service as well as its 663 million customers for $8.5 billion. The acquisition is the biggest Internet takeover since the age of the Internet bubble.

The reason for the purchase was for both companies to catch up in the online and mobile advertising realm. This takeover could help Steve Ballmer, Microsoft CEO, tempt Skype users to try Microsoft's phones and software in order to limit Google Inc.'s market share in internet and mobile advertising. This will also help Skype in finally obtaining revenue.

According to Skype's financial statements, in 2010 it recorded a loss of $7m on revenues of $860m – $1.30 per registered user a year, or $5 per "connected" user a year. While revenue loss have been decreasing for the past year-on-years, it has been able to negotiate better call termination rates around the world with telephone companies.

Ballmer mentions, ""Skype is a phenomenal service that is loved by millions of people around the world. 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." This will be implemented by Microsoft connecting Skype to Microsoft Outlook e-mail, Xbox and Kinect game consoles, Windows mobile phones and corporate-phone software.

Skype CEO Tony Bates will be president of the Microsoft Skype Division and will over-see the newly established Microsoft strategic business unit.

All of this is very great news and due to the high volume of "Skypers" out there, it also poses some trouble.

Due to Skype's partnerships with AT&T and Verizon Wireless, Microsoft may a have a difficult time in convincing wireless operators to support mobile phones with Windows mobile software, which is deemed a laggard within the mobile telecommunication world. The acquistion also poses a threat to AT&T Inc. and Verizon Wireless because it could cut into their voice revenues since Skype lets members make free voice and video calls to each other as well as to outsiders for on average 2.3 cents a minute.

It would probably be ideal for Microsoft and Skype to still maintain good relationships with cell-phone carriers in order to drive a possible adoption of Windows Mobile. But while pursuing this, I would strongly focus on effectively embedding Skype within the Xbox and Kinect game console in order to increase sales of the console and usage of its Xbox network. Imagine not just playing a controlless home video-game console while video chatting with a friend through Skype's premium VoIP, but through the Xbox network being able to view your buddy playing Call of Duty: Modern Warfare! How cool could that be!!

Microsoft could make Xbox members become Skype users and enjoy all the services both the Xbox and Skype already offers.

Dut don't forget Tablet PC's.

Traditional PC's are being replaced with tablets and if you throw Skype into the mix Microsoft will have a unique edge compared to its competitors Apple and Google.

In the near future, I predict wireless operators such as AT&T and Verizon Wireless lowering their prices in order to compete in this dynamic market.

For more information on the acquistion, please click here: Bloomberg BusinessWeek and Guardian.co.uk