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matsandalex
matsandalex
Articles (245) 

Bill Gates Pushed for Skype Acquisition

May 18, 2011 | About:

More details have emerged about the recent acquisition of Skype. Microsoft (NASDAQ:MSFT) 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 (NASDAQ:CSCO) 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.


Rating: 4.2/5 (17 votes)

Comments

amitduapec
Amitduapec - 9 years ago    Report SPAM
Bill Gates has sold 20 million stocks of microsoft after the deal :)
sobko
Sobko - 9 years ago    Report SPAM
Gates selling $20 million in stock is literally the equivalent of me selling $5 worth my stock.
raj123456789
Raj123456789 - 9 years ago    Report SPAM
mikewen
Mikewen - 9 years ago    Report SPAM
Of course Bill Gates agreed, he is still the chairman, it will be very difficult without his approval.

I do not understand why so many people talking about value Skype, it's a strategic buy out, wait and see what kind of products/services after a few months or a year, then we will have better idea.

You need to trust the board and management, if you do not, do not buy the stock.

I do not understand why Intel bought Macfee, but I trust the management, and added large position around $19.

I think Microsoft has been doing right things recently, Kinect, WP7, Nokia, Skype, give it 1-2 years, they should be doing well.

matsandalex
Matsandalex - 9 years ago    Report SPAM
Gates is perpetually selling shares so that he has money to donate to charity - it has nothing to do with the Skype acquisition.

amitduapec
Amitduapec - 9 years ago    Report SPAM
20 million stocks of MSFT means selling value around 500 million. .
aldandrea
Aldandrea - 9 years ago    Report SPAM
Microsoft Corp. has been buying back 2 million shares of its stock EVERY DAY for the past six months. That's around 5,000 shares a MINUTE (or $125,000 per minute).

Bill Gate's personal sales of MSFT stock pale in comparison, and the mega buyback is strong evidence of what Gates and others on the board think about MSFT as an investment.
amitduapec
Amitduapec - 9 years ago    Report SPAM
Again that is share holder's money.

Directors are obviously in favor of deal that is why they did it.

MSFT is undervalued in my view as well. But real question is will they be able to compete with Apple and other competitive forces. only time will tell. Will Skype be able to add 1 billion in PBT to Microsoft ?

matsandalex
Matsandalex - 9 years ago    Report SPAM
Amit - Why do people keep comparing Apple to Microsoft? Microsoft does not really compete with Apple. Microsoft is an enterprise company. Apple is a consumer company. Totally different.

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