Microsoft and Skype, represented by their respective CEOs, just had their press conference to explain their deal.The big picture:
- Skype is awesome for Microsoft because it’s about “connecting your life.” Microsoft has communications apps for personal life like Messenger and Hotmail, for work like Outlook and Exchange, and devices like Xbox, Kinect and Windows Phones, and Skype sits at the nexus between all of these, and so there’s opportunities in all those areas.
- Skype is an amazing business. Usership is growing, revenue is growing, and EBITDA is growing even faster. Microsoft expects the deal to be accretive to earnings by the end of this calendar year.
Steve Ballmer, Microsoft’s CEO, was also at pains to emphasise that Skype will keep supporting non-Microsoft clients. And indeed they’d be foolish not to, as Skype’s value proposition is that it works on countless platforms.
Skype’s CEO Tony Bates pointed out the service has very impressive usage numbers: 400,000 new users join daily, 170 million users use the service each months, and they use it at a rate of 100 minutes per user per month.
Skype will be operating as its own Microsoft division, not as part of the online services division, with Bates as its president.
The business side
Microsoft’s CFO talked up Skype’s business metrics, which are indeed impressive: $860 million in revenue, with 20% growth year over year, $264 million in EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), growing 40% year over year, meaning the business is growing in all the right ways.
They didn’t talk about profits, which must mean the company is still unprofitable as it was when it filed for an IPO.
But it’s still an impressive, growing business.
When it comes to building the business, they talked up the advertising opportunity a lot. Advertising hasn’t been huge on Skype, and it’s an obvious revenue generator, and something that Microsoft is keen to get into.
The product side
Obviously for Microsoft the big opportunity is putting Skype into as many platforms as possible.
Skype will be in Windows Phone 7, which is cooler than FaceTime. Skype will be in Xbox and Kinect, which could be very cool for home video conferencing/chatting. Skype will be in MSN Messenger, in Hotmail, in Outlook.
And on the corporate services side, there will obviously be some integration and synergies with Lync, Microsoft’s corporate communications product.
An interesting bit we learned is that video is now 40% of Skype usage, and growing. So video is huge for Skype.
Bates also talked up the opportunities for Skype in terms of social networking. He said the people you talk to on Skype are really your “inner circle” and so there’s opportunities in terms of social for Skype. We’re less convinced about that because that’s not our experience, but we’ll see. Certainly a partnership with Facebook is long overdue, and should happen now that Skype is owned by longtime Facebook partner and investor Microsoft.
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