More details have emerged about the recent acquisition of Skype. Microsoft (MSFT, Financial) has been criticized for paying $8.5 billion a company with no profitability.
Some investors have sharply criticized the deal as another reason why Steve Ballmer should be fired by the board of directors.
A typical response on this website was the following:
"Instead, Microsoft is making another acquisition, and Skype will likely be as wasteful as the ones it did in the past. I am fairly sure, a few years down the road, Microsoft will take a "one"-time charge to write down the goodwill for this acquisition, not unlike eBay a few years ago, after their purchase of Skype."
However, shrewd investors wanted to see whether the Skype acquisition was orchestrated by Ballmer or by Bill Gates.
Gates is no longer involved in day-to-day operations, and many suggest that this is the reason why Microsoft has lagged tech peers like Apple (APPL).
In an interview with BBC, Bill Gates said, "I was a strong proponent at the board level for the deal being done."
More specifically, Gates talked about why the Skype acquisition makes sense from a technological point of view."The idea of video conferencing is going to get so much better than it is today. Skype actually does get a fair bit of revenue," Gates said.
"It'll be fascinating to see how the brilliant ideas out of Microsoft research, coming together with Skype, what they can make of that," he said.
Thus, Microsoft bought Skype to compete directly with Webex in the business conferencing industry. This is one of the reasons I was bullish about the acquisition last week:
"However, for video conferencing I use Webex. I expect that Microsoft will bundle a video conferencing solution into Skype in order to take a chunk out of Cisco’s (CSCO, Financial) market. Cisco bought Webex for $3.2 billion in 2007. This was also at a valuation of 9X sales, a similar multiple to what Microsoft paid for Skype.Thus, Microsoft has now opened up a new revenue stream with the Skype purchase." The fact that Bill Gates was behind the Skype acquisition should make Microsoft investors sleep better even after paying a premium.
Some investors have sharply criticized the deal as another reason why Steve Ballmer should be fired by the board of directors.
A typical response on this website was the following:
"Instead, Microsoft is making another acquisition, and Skype will likely be as wasteful as the ones it did in the past. I am fairly sure, a few years down the road, Microsoft will take a "one"-time charge to write down the goodwill for this acquisition, not unlike eBay a few years ago, after their purchase of Skype."
However, shrewd investors wanted to see whether the Skype acquisition was orchestrated by Ballmer or by Bill Gates.
Gates is no longer involved in day-to-day operations, and many suggest that this is the reason why Microsoft has lagged tech peers like Apple (APPL).
In an interview with BBC, Bill Gates said, "I was a strong proponent at the board level for the deal being done."
More specifically, Gates talked about why the Skype acquisition makes sense from a technological point of view."The idea of video conferencing is going to get so much better than it is today. Skype actually does get a fair bit of revenue," Gates said.
"It'll be fascinating to see how the brilliant ideas out of Microsoft research, coming together with Skype, what they can make of that," he said.
Thus, Microsoft bought Skype to compete directly with Webex in the business conferencing industry. This is one of the reasons I was bullish about the acquisition last week:
"However, for video conferencing I use Webex. I expect that Microsoft will bundle a video conferencing solution into Skype in order to take a chunk out of Cisco’s (CSCO, Financial) market. Cisco bought Webex for $3.2 billion in 2007. This was also at a valuation of 9X sales, a similar multiple to what Microsoft paid for Skype.Thus, Microsoft has now opened up a new revenue stream with the Skype purchase." The fact that Bill Gates was behind the Skype acquisition should make Microsoft investors sleep better even after paying a premium.
