Microsoft Buys Skype

It’s official: Microsoft is buying Skype for US$8.5 billion. Ben Horowitz, one of the founders of Andreesen Horowitz (which participated in the purchase of Skype from eBay 2 years ago) has some interesting insight into why they bought them in the first place, and what he sees for Microsoft. Andrea Spiegel at Forbes has some thoughts on how Microsoft can avoid screwing it up.

This is definitely an interesting development, but in some ways not a surprising one. Microsoft has a history of buying most of their more promising technologies, and then building on the acquisition. Given the apparent in-roads that Google and Apple have been making with their own telephony products (Google Voice and FaceTime, respectively), it shouldn’t be a surprise that Microsoft decided to get into that game as well. What this will mean for the Skype client on non-Microsoft platforms remains to be seen, but if Microsoft is smart, they will continue to maintain the Skype client on iOS and Android, as well as add full support for other platforms with meaningful installed bases. Much as I know it galls the powers that be in Redmond, the mobile space is not shaping up like the PC market, with one over-arching platform dominating the space and leaving crumbs for marginal players. If you want your product to succeed in the mobile space, you have to be prepared to target multiple smartphone and tablet platforms.

What this deal does, though, is leave HP and WebOS out of the mix with a built-in web-based telephony platform. Playing Captain Obvious, their options are to hope Skype and Google Voice make their way onto the WebOS platform, hope someone else builds a viable competitor to Skype, or build their own system. Unless something changes radically, WebOS could find itself dwindling to nothing as the other mobile platforms gain users and infrastructure.

Adding Skype to Windows Phone 7 could be another shot in the arm that, along with Nokia’s partnership, might make the platform a potentially viable one. So far, Windows Phone 7 hasn’t set the sales charts on fire, and they were the only smartphone platform to not only lose market share in Q4 of 2010, but sell fewer units that the previous quarter (and this during one of the busiest seasons for consumer spending in the year). How much the combination of Nokia and Skype helps Windows Phone 7 remains to be seen.

Will Microsoft somehow screw up Skype? It’s always possible, not just because it is Microsoft, but because becoming part of any really big company has both peril and promise. Just ask anyone who was bought by HP, IBM or Oracle. However, Microsoft seems to be changing, given that they don’t dominate the technology space (or at least the mindshare) they way they used to. With companies like Apple and Google doing more to lead the way, Microsoft has had to work harder to get themselves viewed by the general public. Bing has turned out better than Microsoft’s previous attempts at search, and they’ve had to work harder (and do a better job) on things like their cloud-based services. The company still has a long way to go, but there seems to be more steps forward than backward when it comes to useful features and quality.

In the end, the Skype purchase is probably a good one for Microsoft. The team at Skype will have some adjustments to make, not all of them pleasant, and it will take time to see how this shakes out for both organizations. Microsoft needs to tread carefully, though, to avoid messing this up.

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