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A Second Look: Why Microsoft Bought Skype

June 27, 2011 07:23 by: E. Werner Reschke   0 Comments

Categories: News , Review

Tagged: iPhone , Microsoft

First there was the Pony Express, then the telegraph and then the telephone. As time marches on man seems to find a better, cheaper and quicker way to communicate.

It is no different in the 21st Century. Today we have rss feeds, twitter, facebook, e-mail and the beloved "mobile phone" But wait, there's more. Mobile phones have now morphed into mini computers with Apple's iOS, Google's Android and Microsoft's Windows Mobile 7 platforms. In this new war of the mobile device, it appears Microsoft is bringing up the rear with no real chance of catching Apple or Google. Microsoft has lot's of money to stay in the game, but if things stay the same, they are the odds on favorite to being the big looser. And that's exactly why Microsoft may have purchase Skype.

When Apple first entered the mobile space with the original iPhone it was only available on the AT&T network. Many people, including myself, wondered why Apple had picked only a single carrier. It seemed to limit their chances of mass adoption. Speculation arose that Apple might use it's billions of dollars in cash reserves to purchase one of the carriers. Maybe Apple would buy AT&T or Sprint or T-Mobile? The thinking was that if Apple controlled the entire vertical solution — from handset to OS to network — they would have an incredible advantage in marketing and pricing.

Alas, Apple decided to go a different route and just make the best mobile device out there despite a limited choice of network providers. Their decision not only saved them billions, it also seems to have worked. Moreover with iOS 5, Lion and iCloud keeping devices in sync like never before, the competition is going to be slobbering over this integration for years.

And that brings us back to Microsoft. As it stands, they are in last place with no real strategy to move closer, let alone into second place. That may be why Ballmer & Co. purchased Skype. The first reason is that they may be trying to create their own vertical solution and instead of buying a carrier they decided to go all digital, so Skype was a logical choice. The second reason is they need to do something drastic to try and shake up the industry. If you've ever played sports and were behind badly, you start doing things you normally wouldn't do because your normal approach obviously isn't working — and time is running out. Microsoft might see they indeed are in the fourth quarter and down by 30 points. They have got to do something different and something fast or the Windows franchise is likely to be the minority platform within 5-7 years. Buying Skype and tying it to their mobile phone offering may be the trick to help Microsoft catch up. It's certainly different, if not daring — and really expensive. But $8.5 Billion shows how desperate Microsoft is. It will be interesting to see if their bet pays off.

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