Photo: Matt Rosoff
Skype will become part of Microsoft’s Entertainment and Devices segment for financial reporting purposes, putting it alongside the Xbox business and Windows Phone.It’s a bit of a surprising choice, given that a lot of the business value of Skype will come as it’s integrated with Lync, Microsoft’s corporate messaging product. Lync is a hot seller these days — revenue was up 25% this quarter compared with last year.
But it makes sense because Skype is largely a consumer product today, and will probably be integrated into Xbox Live and perhaps Windows Phone before it gets tied into Lync.
Operationally, Skype will be run as an independent division.
Skype will raise operating expenses a bit in the current fiscal year (which started July 1, 2011) because running an ongoing massive-scale service has higher operating costs than building software, which is still the bulk of Microsoft’s business.
Investor relations head Bill Koefoed says the Skype team including Tony Bates is buzzing around Microsoft headquarters in Redmond, Wash., figuring out how to start integrating the companies. “The whiteboards are full.”
Last year, Skype took in $860 million in revenue and Microsoft said it was on track to grow 40% this year, so it could add more than $1 billion to the Entertainment & Devices segment. Skype also had a net loss of $7 million last year.
The Entertainment & Devices segment earned $352 million on $1.96 billion in sales this quarter, mostly from Xbox. The Xbox Live service is a particular standout, with well over than $1 billion in annual revenue by itself and strong growth, said Koefoed.