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Microsoft Businesses Communications The Almighty Buck

Skype: Has Microsoft's $8.5B Spending Paid Off Yet? Can It Ever? 147

Posted by Soulskill
from the can-you-just-make-it-close-when-i-hit-the-X dept.
mspohr writes "The Guardian has an article by Charles Arthur who predicted over two years ago that Microsoft's purchase of Skype for $8.5 billion was 'a gamble unlikely to pay off.' Arthur has penned a followup providing a fairly detailed analysis of his original criticism (he was wrong about some parts), an update on Skype performance, and a conclusion that it's not as bad as some of the other acquisitions. 'Skype, the company points out, now connects directly into Office 365, Xbox, Windows 8, Bing, Microsoft Messenger, Windows Phone and Lync, its business-oriented VOIP solution, and soon into Outlook.com for everyone. ... Certainly, integration of Skype into all those offerings is what the purchase should have been about. And it does look as though Microsoft has pulled it off. ... But has it pulled off $8.5B worth of integration?'"
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Skype: Has Microsoft's $8.5B Spending Paid Off Yet? Can It Ever?

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  • And why... (Score:5, Insightful)

    by houstonbofh (602064) on Friday August 30, 2013 @02:03PM (#44719175)
    And why is it important to have chat built into my spreadsheet again?
    • by gstoddart (321705) on Friday August 30, 2013 @02:05PM (#44719189) Homepage

      And why is it important to have chat built into my spreadsheet again?

      Why, so you can discuss the TPS reports, of course.

      Other than that, I have no idea since there's already collaboration tools which do all of this and it doesn't need to be in Excel.

      Sounds like bloat to me.

    • Re:And why... (Score:5, Informative)

      by Scutter (18425) on Friday August 30, 2013 @02:08PM (#44719217) Journal

      I assume that by "built into your spreadsheet", you mean integration into Office365. It means that it can be centrally-administered by the company IT department, with contact lists, group messaging, security, etc.

      • chess moves (Score:5, Interesting)

        by goombah99 (560566) on Friday August 30, 2013 @02:44PM (#44719515)

        All programs expand until they can read mail.

        Most moves in Chess are devoted to preventing an opponent from developing a new line of attack, and may have a cost of diminishing your own lines of attack. purchasing skype was a hedge against being caught in a position where google voice was the killer application for cloud based project management and microsoft had no response. If google could see that microsoft would be caught flat footed they could have pushed google voice harder. But now that they see that at best that line of attack is a draw they aren't pushing it. SO it's the line of attack Microsoft prevented that you don't see.

        • IN the future we will wathc our television shows with freinds who are in other locations. We'll have the conference call running with their faces along the bottom of the screen and we can chit chat about how awesome a moment in Breaking Bad season 9 was. Skype and xbox are the devices you need for this.

          • Re:the future (Score:5, Insightful)

            by spire3661 (1038968) on Friday August 30, 2013 @03:11PM (#44719755) Journal
            No we wont. We have had video conferencing in the hands of everyday people for over a decade now, with the last 5 years seeing huge penetration. No one is using it.
            • by cant_get_a_good_nick (172131) on Friday August 30, 2013 @05:21PM (#44720659)

              My bad mind saw "huge penetration" and made me think of Chatroulette, and not Skype.

              • by drinkypoo (153816)

                People capable of huge penetration can use dating services, they don't need cockroulette.

            • by vlueboy (1799360)

              Who here remembers those OFFICIAL microsoft chat servers from back in 1998 or so?
              I think 6 months after I discovered them, most or all of netmeeting servers were taken offline. I haven't touched that project ever since.

              • Re:the future (Score:4, Interesting)

                by vlueboy (1799360) on Friday August 30, 2013 @07:41PM (#44721353)

                Who here remembers those OFFICIAL microsoft chat servers from back in 1998 or so?
                I think 6 months after I discovered them, most or all of netmeeting servers were taken offline. I haven't touched that project ever since.

                Today I noticed that with the huge heavyhanded April push sunsetting MSN messenger in favor of Skype, skype has been updated repeatedly and I've been declining without seeing what they're taking out.

                I had to help someone test the software on their own computer today. Their updated "Call" button is now "Call PHONE" (implies cash expenses.) I won't be putting up with GUI changes meant to force me into paying.

                MS also chose to fail to migrate the Hotmail new email and single-sign-on integration that its userbase loved. They were clearly aiming at forcing more Skype chatting, more potential paid calling and less email usage.

                • by rtb61 (674572)

                  Then the real business question in this case is was Skype necessary in the hooking together of all those services. Skype did have a customer base but if the majority of that customer base were already using say M$ Office, then you paid for what you already had. So was it bought just to make it look like M$ Management were doing something rather than nothing, did it again just devalue the existing MSN services.

                  How much have security scares crippled computer video services, people are shying are for comput

          • by paavo512 (2866903)
            In the future: dear helpdesk, how can I disable these wobbling friends on the bottom of the screen who distract me from watching the show?
          • by Nidi62 (1525137)

            We'll have the conference call running with their faces along the bottom of the screen and we can chit chat about how awesome a moment in Breaking Bad season 9 was.

            Why would I give up screen real estate to see my friends faces when I could be using that to watch a larger picture on the tv?

          • I don't know anyone who does that with voice conferencing or even speaker phone now, let alone video chat.

            Text messaging, an even more primitive way to communicate (historically speaking; telegraph came long before the telephone), has also replaced a lot of realtime voice calls, such that people sometimes spend more time with remote friends than the ones they're with.

            To be sure, the Game of Thrones season finale saw a lot of "reaction" videos, but I think those were more set up by friends/family who knew wh

        • Thank you for the insight, Mr. Fischer.

          Please give Satan my regards.

        • by m00sh (2538182)

          Didn't they have Microsoft Messenger?

          The thing kept popping up in startup.

        • Re:chess moves (Score:4, Informative)

          by Anonymous Coward on Friday August 30, 2013 @04:54PM (#44720467)

          Nowadays they expand until the NSA can read your mail and everything else ;).

          Who's to say the NSA didn't ask Microsoft to buy Skype for them?

          After all I'm sure Skype was a bit more inconvenient for them to monitor till Microsoft bought it.

          • It certainly was.
            One of the main things which changed when Microsoft took over was that they started being in charge of all the supernodes.

            Before microsoft, anyone using skype could become a supernode, meaning, the places where most of the data goes through (co-ordinating the chats and voice at the very least).

            My first thought was that they destroyed the decentralized nature of skype, probably to be able to monitor everything much more easily.
            And lo and behold.

    • by alen (225700)

      there are lots of online conferencing services out there that are cheaper than paying for an "enterprise" solution of buying your own hardware. embedding it into applications people use will make sharing data easier during calls

    • Re:And why... (Score:5, Insightful)

      by Anonymous Coward on Friday August 30, 2013 @03:07PM (#44719701)

      I think buying Skype was as much about buying the verb than anything else. People google things, nobody bings or microsofts anything.

      • "I think buying Skype was as much about buying the verb than anything else. People google things, nobody bings or microsofts anything."

        They should have called it Bang.

      • Perhaps they could have called their video service "Twerk". Microsoft could have moved from cheesy advertising to something like this [youtube.com]. Just replace Robin Thicke with John Hodgman, and man oh man, Justin Long won't look hip and cool no more.

      • And people "skype" one another? I think "IM" and "call" are there everyday verbs, sorry.

        • My mom absolutely uses Skype as a verb.

          IM is still geeky and doesn't generally apply to the voice and/or image, but I do use that (sometimes when I'm not thinking I still call it "MSNing" rathing than "IMing"). "Call" is still reserved for telephones, not computers, in my experience.

      • For a very long time people "MSN'd" other people for Instant Messenger. I understand that was less common in the US because of compeition from AOL or ICQ or Yahoo Messenger or something, but it was so common elsewhere it was there's to lose in many markets. And they did. To Skype. Then they bought Skype and it came back to the fold.

    • So that they can force it down your throat, of course. How else do you expect them to rebuild their monopoly?
      • I expect their new CEO to begin lobbing patent bombs. That's how I expect them to rebuild their monopoly.

    • When they say it "connects directly into Office 365", they're talking about the service that includes email hosting, chat, etc.
    • So the NSA can record what you are doing of course.
    • by gregor-e (136142)
      Perhaps you can include hyperlinked cells that, for example, directly call whomever was responsible for the figures on the spreadsheet?
  • by Anonymous Coward

    ... was forked over from the US Government to add a convenient back door to Skype?

  • by Anonymous Coward

    Considering they can listen in to all the calls via Prism, you would think the NSA would be nice enough to chip in a little dough and help Microsoft out.

  • No. (Score:5, Interesting)

    by UnknownSoldier (67820) on Friday August 30, 2013 @02:08PM (#44719231)

    Next story. Can we get some "real" news please?

    Having our own dedicated TeamSpeak server our gaming group rarely uses Skype anymore. The quality of Skype is noticeably better but _dynamic_ "conference" calls are a pain to setup with Skype. Microsoft is not making a dime off us and probably never will. We'll probably switch to an open source Skype replacement at some point in a year or two.

    I don't know how the hell Microsoft "justified" the billions it paid for Skype. You can't "buy" popularity as much as Microsoft would like.

    • My question is, could Microsoft have gotten all of that integration on Skype's dime without buying the company. I would think that if Skype wanted to increase market share, it would have jumped on the opportunity, and save MS $8.5bn
    • by Anonymous Coward
      My group went from Teamspeak, to Ventrilo, to Mumble. The admins praise it (and it's nice that it's OSS and free with no restrictions), but Vent seems most common.
      • by rot26 (240034)
        but have they tried Murmur, or Mumble, or Hrrumph?
        • but have they tried Murmur, or Mumble, or Hrrumph?

          Eventually they will all move to getoffmylawn, the mature and proven technology.

    • by DarkXale (1771414)
      Skype has never been suited for any large decentralized gaming group or organization - thats always been the purpose of dedicated host systems like TS/Mumble.
      Skype does however the advantage for smaller, 2 or 3 man groups.

      Or as is the use in WoW: Skype for Arenas, Mumble for Raids.
    • by artor3 (1344997)

      My company, of a couple thousand people, has switched to paid Skype accounts for all of our conference calls. Tell me, which market do you think Microsoft is most interested in... corporate teleconferencing, or gamers chatting about the latest WoW raid?

      I'm not saying Microsoft will make back their investment (they won't), but the fact that your group of friends prefers TeamSpeak could not possibly matter any less to them.

  • Is Skype disappearing today? If not, then Microsoft does not need to have recovered the cost by now. To make economical sense, they only need to have recouped their losses by the time Skype closes down. And that includes the funneling, loss leader and etc that connecting to all of these other systems will allow for.

    All in all, Microsoft has turned Skype into what they want it to be now, and unlike the other emBalments, this one turned out well. Kudos.

    • by Fyzzler (1058716) on Friday August 30, 2013 @02:35PM (#44719453)

      Is Skype disappearing today? If not, then Microsoft does not need to have recovered the cost by now. To make economical sense, they only need to have recouped their losses by the time Skype closes down. And that includes the funneling, loss leader and etc that connecting to all of these other systems will allow for.

      You are obviously neither a CPA nor an MBA. The general rule of thumb is that an investment must have a ROI of less that 7 years max, and ideally under 3 years. Otherwise, you are much better off making a different investment choice with 8.5 Billion dolars.

      • Internal Rate of Return is considered a sounder methodology then ROI but the though is the same.
        http://en.wikipedia.org/wiki/Internal_rate_of_return [wikipedia.org]

        If you make 10b on a 8.5b investment over 2 years that’s probably a win.
        If it takes 10, probably not.

        • by Kaenneth (82978)

          Shouldn't it also be judged by the overall economy?

          What is MS had invested that money into Real Estate a few years ago; like expanding their campus(s) (campi?)

          • Another post mentioned Internal Rate of Return. Basically, you calculate what the yearly return is, on average.

            Then you could use this to compare to other investments. Including real estate, bonds, etc. For the Expanding Campuses, you'd need to calculate that IRR as well and compare.

            In general, the Skype IRR would be less than buying Apple stock :)

          • How do you judge the effect on investment on the “overall economy?” If you are talking about stakeholder, community impact, etc. or other vague guidelines I can justify almost any investment – or judge against them.

            The corporation is a tool invented by man and it does one thing well – return cash value to shareholders. It does other things less well. If you want to increase investment to the “overall economy” there are better choices. Cutting corporate and capital gains w

            • by Kaenneth (82978)

              I mean compared the the overall economy, not what is contributes to it.

              Gaining 10% while the DOW drops 5% is good, Gaining 10% while the DOW goes up 15% is bad.

              • Maybe.

                You need to figure out the risk adjusted return. If you are making massive bet the company moves and only getting 15, then no. I you have a guaranteed lock of 5% then that is better then the stock market at the moment.

                Which is one of the things that IRR lets you do. It is not just the return but you need to factor in risk and the cost of capital.

                And the DOW is a 2nd rate index. S&P 500 is better - or the NASDAQ 100, which is better for large tech companies.

      • by rwv (1636355)

        The general rule of thumb is that an investment must have a ROI of less that 7 years max, and ideally under 3 years.

        For small companies, this guideline makes sense. For companies with a market cap of $280 Billion like Microsoft it would be foolish of them not to be spending billions of dollars trying to expand into new markets. Microsoft as a company is just about 30 years old and they have been a leader in the software industry for about 20 years. Companies like this absolutely must have strategic plans that go beyond the "7 years max" that you cited. Lord knows XBOX was a gutsy call back in 2001... but a dozen year

      • by DogDude (805747)
        You are obviously neither a CPA nor an MBA. The general rule of thumb is that an investment must have a ROI of less that 7 years max, and ideally under 3 years. Otherwise, you are much better off making a different investment choice with 8.5 Billion dolars.

        That's both absurd and wrong. What you said doesn't even make sense.
      • by Kjella (173770)

        Spoken like a true bean counter, this is where economics meets accounting. Very often it is easier and more profitable to build a moat around your cash cow than to create new, profitable and big business. For example take Microsoft's stagnated IE6 and crippled Java implementation, could they have "embraced the web"? Sure, but why would they promote web applications and in the idea of "write once, run anywhere" when they could piss in the pool and get people to stay on thick clients and native software? What

    • Re: (Score:2, Interesting)

      by Anonymous Coward

      All in all, Microsoft has turned Skype into what they want it to be now, and unlike the other emBalments, this one turned out well. Kudos.

      I'm pretty happy with it. It has a working Linux client I use daily for voice calls and instant messages. Call termination in the US is $0.023/minute pay-as-you-go with Skype credit and quality is excellent. You can configure your account with a mobile phone number so the call appears to come from you. I've found this to be essential; people frequently don't answer unknown callers.

      Google Talk/Voice doesn't even have a standalone Linux client, open, closed or otherwise. There is a browser plugin.... I n

      • by pspahn (1175617)

        Google's stuff doesn't quite measure up because it's free. I've used Voice for a few years now and have never paid them a single dime.

        And the "wrong" number? Well, my Voice number is my number. That's the number you use to get a hold of me. I don't mind Skype so much, I keep an account for those times when it's used for an interview or what not, but I just don't see using it instead of Voice, simply because anything > $0 is too much for a service I dislike using anyway (I hate phones and probably spend

      • by vux984 (928602)

        Google Voice will sell you a number for incoming and caller id

        And last I checked they don't offer that service in obscure places like Canada or all of Europe.

        Google's stuff just doesn't measure up.

        Pretty much.

    • by shentino (1139071)

      There's also reduction of losses from competition.

  • by MrEricSir (398214) on Friday August 30, 2013 @02:13PM (#44719271) Homepage

    Seems like the larger question here isn't whether or not Skype will pay off, but how much it costs to aquire a well known company vs. build a competing product in house.

    While Microsoft was busy loading up suitcases with cash, Google churned out Google Talk / Hangouts. Did that cost $8.5 billion to build and market?

    • by vux984 (928602) on Friday August 30, 2013 @02:38PM (#44719477)

      but how much it costs to aquire a well known company vs. build a competing product in house.

      They mostly bought the userbase not the product.

      Google churned out Google Talk / Hangouts.

      Know many people that use "Hangouts" for business? Or would be willing to pay actual money to use "Hangouts" for anything? I sure don't. As a free service, yeah I know some people using it, and although I have at least 3 active gmail accounts and an android phone with it pre-installed (2 even linked to google apps for enterprises, I've still never fired up hangouts.

      Skype is pretty ubiquitous by comparison.

      • by MrEricSir (398214)

        Know many people that use "Hangouts" for business?

        Where I work, it's either Hangouts or ye olde fashioned phone calls.

      • by ADRA (37398)

        I use hangouts for business. It's great to use as a screen sharing tool for presentations. It could be better but its definitely usable.

        • by vux984 (928602)

          Yeah, skype has that too. And with integration into office, and active directory, its probably going to be more streamlined to set and administer.

  • Seeing the nice rythmic graph of Microsoft's E&D division revenue I was expecting to see if their peeks were periodical on a yearly basis, bi-yearly, or whatnot..why I found..."horizontal axis title."

    Methinks this article could use a little more input from the editor.

  • For someone else (Score:5, Interesting)

    by Sir Holo (531007) on Friday August 30, 2013 @02:17PM (#44719309)

    ...And it does look as though Microsoft has pulled it off. ... But has it pulled off $8.5B worth of integration?'"

    Well, if anyone uses Outlook or Skype to communicate, then yes. Yes, MS has "pulled off $8.5B worth of integration" for the NSA.

    Skype is confirmed to be back-doored. And, with its brilliantly obfuscated code, would reasonably be expected to have a few more.

  • Skype is the most powerful == valuable survilance tool ever.

    All of those are incredibly valuable. The CIA alone spends $11.5 billion on Data Collection Expenses each year [washingtonpost.com]. And of all organizations, Skype is one of the most able to provide information to them - whatever your PC's microphone's hearing now - whatever non-skype-related files Skype keeps accessing even though it has no need to - etc.

    • Indeed. The US Treasury paid for Skype.

      And that, friends, means that the people paid for Skype.

      But don't expect the profits to go to you.

      American capitalism: capitalise the profits; socialise the costs.

  • by Impy the Impiuos Imp (442658) on Friday August 30, 2013 @02:28PM (#44719405) Journal

    > Skype: Has Microsoft's $8.5B Spending Paid Off Yet?

    Skype's Former Owners: Yea bigtime!!!!2!1!!!1

  • The NSA paid for it. (Score:1, Interesting)

    by Ckwop (707653)

    It should be obvious that the money didn't come from Microsoft. It came from the NSA.

    They wanted to wiretap all Skype conversations. They got Microsoft to buy it for that end.

    You'd be nuts in the post Snowdon world to assume anything else.

    • by linuxguy (98493) on Friday August 30, 2013 @05:32PM (#44720715) Homepage

      > It should be obvious that the money didn't come from Microsoft. It came from the NSA.
      > They wanted to wiretap all Skype conversations. They got Microsoft to buy it for that end.

      Why would NSA pay Microsoft, a US company $8.5billions to buy Skype from eBay, another US company?

      > You'd be nuts in the post Snowdon world to assume anything else.

      Tell me about it. NSA has cameras in every corner of my house. Outside in the trees. In my toilet. Many of my kids' toys need batteries, not just for moving the motors in the toys but they have cameras and mics in them too. I do my best to get rid of this stuff. When I threw my wife's DSLR and cell phone in the garbage along with all the kids' toys, she first gave me the blank stare and then started screaming at me. Small price to pay, if you ask me.

      Some people say that I am overreacting. But they don't know much of what I have read on the Internet. Only if they had read some of the same forum posts that I have.

  • by Chas (5144) on Friday August 30, 2013 @02:47PM (#44719543) Homepage Journal

    Howsabout "Fuck No!".

    HOWEVER, judging at this point would be stupid in the extreme.
    This isn't about taking a single benchmark after a couple years and declaring it "worth it".
    This is about amortizing the cost against the value the product's integration bring into other products.
    Even with further development and support costs, if it becomes a foundation technology for Microsoft for the next 5-10-15 years, $8.5 billion will have been VERY worth it.

  • by Glires (200409) on Friday August 30, 2013 @02:51PM (#44719571)

    Of course Microsoft isn't going to make any profit on Skype if they don't actually use it in any of their products.
    Sure it's in Office365, but it's not in Office 2012.
    I guess it will be in the not-yet-released XBox One, but it isn't in the currently-available XBox 360.
    They didn't give me the option of merging my Skype friends with the Xbox friends, or my Outlook contacts with the Skype contacts, only my MSN contacts (by now I had forgotten I even had any MSN contacts).
    Some idealist in the Microsoft management probably thinks that Skype will be some sort of hook that makes people buy products and should therefore be limited to the products that most badly need marketing help. But in reality all they have done is put Skype on track to be obsolete before they even finish integrating it with any of their products. In a few years, Microsoft will have killed Skype like they killed Groove.

  • In the long term I think it will be worth it. Skype is a household name and is almost a verb for video chat now. Skype itself may not make $8.5 billion but the products receiving skype integration easily do and skype is a great feature for all those products which will help keep them competitive. Outlook plus skype would be a killer combination.

    • In some ways, I wonder if this was their answer to FaceTime and Google Hangouts but for their core customers: businesses.
  • then it's nothing that PRISM won't fix. I, for one, am never going to use that product again. Which is a shame, because I really liked it (and I'm sometimes away for work and like to video-chat with my family back at home).

  • If I click ads disabled ? ;) This must be a JOKE. As usual, the linux Skype has having huge compatibility problems, and I really believe it must be a "coincidence". And lets not get started about the backdoors they have for law enforcement agencies, or the devious nature of the p2p protocol.
    • I've been using Skype on Linux for years, and it's always worked pretty well for me.

      (The latest update to the Android phone client, however, is a complete train wreck.)

  • ... is that Skype works fine in most of popular platforms, including Windows, MacOSX, Linus distros, Android, iOS, Windows Phone.
  • I think what he fails to see is some times it it is not about how much you make from the subscriber base, as in skypes. It is how much you save developing a competing product, or how much it increases your other products sales with the integration of the product. No one buys a Ferrari because it has run flat tires, but it is one of many things that justify the price.
  • Microsoft has just about destroyed skype, so don't worry. They're keeping with their business model. Their latest version on android introduced numerous device and app breaking bugs making the software nearly unusable. The inability to make a useful bug report really shows us what Microsoft brings to the table.

With all the fancy scientists in the world, why can't they just once build a nuclear balm?

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