I don't believe that at all. Google doesn't need Skype. Microsoft bought Skype because they have large amounts of cash in Europe that they cannot repatriate without taking a huge tax hit. For some strange reason, Ballmer has that obsession with hyperactively pursuing the same consumers that Google and Apple have. That's why he didn't see anything else to buy in Europe (Actually there isn't a whole lot).
But there is something: SAP. What Microsoft should do is take on Oracle and IBM instead of Apple and Google. They should make an offer to that large number of companies who want one thing more than everything else: Peace of mind based on an integrated stack. They are ready to pay up. Microsoft is the master of integration (some call it lock-in). Together with SAP, Microsoft has the most complete enterprise stack imaginable. All of a sudden even Windows Phone would have a place in this world as a BlackBerry successor.
I agree with this wholeheartedly -- Microsoft's fatal error was assuming they would continue to be the dominant force in both consumer and enterprise computing. They still own the enterprise. Why they aren't happy with this and focus on taking steps to ensure their dominance there for the next decade is beyond me.
They think that what's popular with consumers will eventually make its way into enterprise. Or in other words, their consumer efforts are the steps they're taking to (try to) protect enterprise dominance in the long term.
You might have something there! A few years back I wondered if enterprise software was experiencing a disruption because of the way user expectations were being set outside of the company:
Maybe Microsoft sees this they way you suggest and believes that by controlling the consumer experience, they will also control the enterprise experience. For example, if they control the dominant VOIP consumer application, their tools can dominate enterprise-VOIP integration.
I don't know if they have the management moxie to pull it off, but I think you may be right about what they're trying to do.
Yeah, this isn't my speculation, it's how Ballmer and others have been publicly justifying their decision to continue targeting both consumer and enterprise instead of splitting up into two companies or dumping the consumer side.
They're still the ones who make the most used OS in the world. They're not the ones innovating and creating new markets and paradigms. But were they, ever ?
I've waved the "What did Microsoft ever invent?" flag plenty in my life, so let me try and advocate for the devil:
Microsoft basically invented the hardware-agnostic software platform. Before Microsoft, there were a variety of hardware platforms, each with their own libraries and languages... not unlike the situation today with phones. Developers had to choose what to target... not only Mac vs PC, but different video cards, different sound cards, different network stacks, etc.
Microsoft took that fragmented market and unified it under a set of standard APIs for both hardware makers and software developers to target. I would consider that an innovation: the loose coupling that they enabled allowed much faster innovation in both hardware and third-party software.
Interestingly, Netscape tried to play the same game on top of them (unifying Windows, Mac, and UNIX under one standardized API), and though Microsoft was able to destroying them, Webkit has succeeded where Netscape failed, and it is slowly making Microsoft irrelevant, just as Gates feared.
Other than that, I don't think Microsoft invented much. But they did a good job copying, were ruthless with business executation, and so their one innovation ended up being a multi-trillion dollar innovation.
> Microsoft basically invented the hardware-agnostic software platform
Digital Research did that. You could run a CP/M program on any CP/M-capable computer. Microsoft tried that with MSX (and failed) and then with MS-DOS (and succeeded on a different hardware platform). Only then, different graphics cards and printers became relevant.
> Other than that, I don't think Microsoft invented much
Visual Basic is one thing that comes to mind. I don't remember anything like it before. Hypercard and Toolbook were huge and heavy in comparison. VB allowed BASIC programmers to write compact Windows programs. That more or less doomed DOS.
To be more precise, MS-DOS (and 86-DOS before that) tried to copy CP/M on that area (the original platform for SCP 86-DOS which MS bought and renamed MS-DOS was SCP's S-100 8086 cards which existed before the IBM PC), but MS bought SCP in the first place because they needed an OS to sell to IBM for their 8088-based PC, and so of course it first shipped on the IBM PC, and what happened was that the DOS calls was too limited and slow, so apps used the BIOS and even direct hardware access. So in the US full IBM PC hardware and BIOS compatiblity ended up being needed. (In Japan it was a different story)
Microsoft basically invented the hardware-agnostic software platform
I'm trying hard to understand what you're talking about and its not working. Windows has run on the "PC clone" for almost its entire existence. IBM pioneered the original PC as a fairly easily clone-able platform, meaning it wasn't hard to reverse engineer the bios. It was one hardware platform, one hardware standard, that multiple manufacturers could target (and it was created by IBM despite repeating more of the benefits). But that kind of thing had happened at least since Boroughs (I think) created the first IBM compatible mainframe.
Windows runs on PCs. It doesn't run on Mac, on mainframes or anything else - contrast that Linux, which truly runs on a huge variety of platforms.
I think you're too focused on looking at it from a technical perspective. I think what erikpukinskis is referring to is "hardware-agnostic software platform" as a business model/industry environment.
Maybe IBM did invent that, but it was accidental. I'm not sure they did though, I think MS did.
I think a case can be made that huge software companies generate gigantic sums of cash. They have to do SOMETHING with this cash. They could give it back in dividends but most investors would prefer they instead used their internal cash-multiplier machine because it probably runs better than their own would should they have to reinvest dividends.
So what do you do? Acquire.
Look at Microsoft. Look at Google. Adwords, Android, Chome, Maps, Voice, YouTube, etc, etc, etc, all acquired.
It still takes a talented company to marshal the resources and assets of these acquisitions into a successful, larger conglomerate. And in the cases where the sum is more valuable than the parts, THAT'S innovation just the same as a homegrown product or language.
Execution is everything.
For everything Microsoft copied from someone you know about, five things you know about were copied from someone you do not know about.
Interesting comment. IMO using a virtual machine to abstract away the hardware is what an operating system is all about. Microsoft has done a lot of work to prevent any competing middleware (Java, Internet browser, Flash, OpenGL, ...) from challenging their position.
Interesting point about taxes. Can anyone confirm if this is how it works? What prevents Microsoft Europe from buying an entity in the United States and holding the new company in Europe? It's not like other European entities need to pay tax penalties on top of the purchase price when buying assets abroad, right?
Good question. Presumably, a corporation cannot pick and choose to act as a single entity in one regard and as multiple independent companies in another. But I'm not sure either how it really works. Would be interesting to hear from an accountant or tax lawyer.
Humorous how the article recommends the US can take the suggested 5% repatriating tax revenue and use it to give a tax break. So the net repatriating tax revenue to the US government would be 0%? Ah, WSJ.
On the other hand dropping the tax would encourage even more overseas shenanigans, which I guess is burning Microsoft (and presumably Oracle and Cisco) for not thinking ahead, forcing them to pass on valuable domestic investments and overpay for less valuable overseas investments.
The WSJ article gives a basic, but slanted description of how it works. Briefly: income earned by overseas subsidiaries is not taxable to the American corporate parent until those overseas earnings are sent back to America via a dividend. Here, rather than pay a 35% rate on their overseas profits, Microsoft chose to use it to acquire another company, essentially delaying taxation on that income until much later into the future, if ever.
Edit: There is no advantage to the reverse (MSEuro buying a US company), since the US-earned income is taxed in the US at the US corporate rates, which are much higher than the European corporate rates. The money would be taxed at a lower rate when repatriated to the Euro owner, but you would have ended up paying the higher tax rate first.
I think you are missing the main point that the article is arguing.
You're right about Google. They do not need Skype, but the article does not say anything about Google needing Skype at all. The article only said Microsoft needed Skype. It was a defensive measurement on Microsoft's part.
I think this is the most important sentence of the article: "Were Google to buy Skype they’d convert those 663 million Skype subscriptions to Google Voice and Gmail and in a swoop make parts of Yahoo and MSN irrelevant." This is important for a number of reasons.
1. If Google were to buy Skype, the 663 million users would probably convert to Google's search engine - if they have not already - and not use Bing, which Microsoft has invested heavily in.
2. By buying Skype, Google could force the 663 million users to only register with a Gmail account. Meaning, those with an MSN email account would be forced to convert.
3. Google would also integrate Google Voice with Skype. With the two utilities working together, they would make an incredibly powerful tool, and the users might start to rely on the two combined utilities. This would mean the users would want the utility on their phones which entices them to buy an Android phone and not a Windows phone.
4. With the buy, Google was looking ahead in the future. They could integrate Skype with Google TV. (Which I know was first a failure, but they are still banking on the idea. They'll come out with it again soon enough.) They would also integrate with Chrome OS, and, if the users come to rely on it heavily with the integration of Google Voice and Android, then it would entice them to us Chrome OS and not Windows.
I think Google had much more use for Skype compared to Microsoft. So, Microsoft did not buying it to go after the consumers of Google and Apple; instead, they mainly bought it to keep their users.
You guys do realize that SAP is at least one order of magnitude larger than Skype, right? It rings in at a $77 BILLION in market cap on the NYSE[1]. I'm not even sure that represents SAP's total value, either. There seems to be a separate listing valued at $55 BILLION that's traded on ETR[2]. SAP AG was the fourth largest software company in the entire world by revenue in 2010[3].
That kind of merger would be unique in Microsoft's history[4]. In fact Skype is already Microsoft's largest merger in history by a sizable margin.
EDIT: The ETR listing is valued in euros, where 55 billion EUR roughly translates to 77 billion USD. Although I still don't know if that fully accounts for SAP AG's value.
I'm aware of that. Usually deals of that size are done at least partly through a share swap, not all cash. Microsoft needs to do something big. Skype just won't move the needle and it still costs a whole lot of money.
But there is indeed a problem caused by SAP's size. It's completely uncertain whether regulators in Europe would allow such a deal to happen. Microsoft and SAP wanted to merge many years ago (when MS was arguably more powerful) but it was called off due to regulatory issues.
That's why it would be an interesting acquisition / merger. It would be a transformative event, changing both companies in radical ways that would require a true leader with vision to take the reigns and recreate both companies.
In my opinion, buying SAP would be Ballmer's worse nightmare - he wouldn't even know where to start in harnessing the energies of both companies, and that's why we'll probably never see this happen.
Give Ballmer a couple years and SAP may be able to buy Microsoft.
That was unfair - Microsoft's demise is not completely Ballmer's fault. The market has been changing in directions Microsoft was not able to follow at speeds they were never able to match.
Would Microsoft be able to afford SAP? According to Google Finance, they have a market cap of $77.04bn and Microsoft would have to pay a hefty premium over this.
Good point. SAP is an order of magnitude bigger than Skype but the point about getting into this space if they're serious about getting into a different space is a good one. Netsuite, intuit & salesforce are trading @ $2.3b, $16.75b & $17.9b. They could conceivably buy all three with just this 'overseas cash' they supposedly need to spend and still have change. Thinking about MS's available cash in terms of companies they could buy really puts some perceptive on it - huge.
They could do nearly six Skype-sized deals, just using cash (without issuing bonds or using stock!) Incredible. They could probably buy SAP, but their cash pile would be gone, plus they would have to give up a significant amount of stock as well. Doubt Ballmer would be willing to risk this.
I've heard elsewhere that Apple is sitting on a ~$35bn cash pile. One wonders when the US Government will declare some sort of 'tax holiday' or window during which these companies can repatriate all this cash.
They have begun taking on Oracle and SAP after buying Navision and turning it into Microsoft Dynamics. From what I've seen, it's a very strong product and I'm expecting it to do well.
Skype is the google of VoIP. I recently travelled to Brazil, and needed to make free calls to our US 1-800 number (vs R$18/Minute for the phone in the Blue Tree Marumbi in São Paulo). I had used google voice as a test a few months ago, and spent the better part of 5 minutes trying to figure out how to do it again - but failed - and I'm obviously highly technical. That suggests to me that 95% of your average community of people would not be able to use Google Voice, as it stands today, to make a phone call from Brazil to the United States.
Skype, on the other hand, made it numbingly obvious and about 2 minutes after typing "skype.com" I was making free international calls to US 1-800 numbers.
Purchasing Skype for Telecom is like purchasing Google for Search. You basically will be purchasing the market segment at this point. Lots of good reasons.
And $3.00/Month for unlimited calling to the United States - Wowza! Lots of room to grow fees there. :-)
Have you called The US from Brazil? They had some geolocation filtering that either made it complex or impossible to make a voice call. Not at all like using it from the united states.
Am I the only one who has had terrible experience with Skype?
I live in New York but my family is from Australia so I use video-calling them to them all the time. I've tried using Skype but basically it's terrible. Poor audio, choppy frame rates and at some point it will start giving messages about "degraded performance" and we'll lose video.
My setup is a 50Mbps cable line using wireless (N) from a Macbook Pro. The other end is ADSL of varying degrees (1.5 to 10Mbps) on wireless (N) from a Windows PC or laptop.
We've basically given up on using Skype.
What works flawlessly and with much higher quality? Facetime.
Am I really the only one who has had terrible experience with Skype?
My point with this is that Skype is not the dominant video medium it once was, especially not from a technical standpoint.
What's more, video calling is becoming a commodity. I think we're near or above 100M Facetime-capable devices (iPhones, iPod Touches and Macs). Google Talk is available to however many millions of GMail users are out there.
Skype isn't even a strong business (IMHO). Most consumers don't pay, which leaves the business type users who use multiway calling I guess. But where p2p video calling is becoming commoditized, who's to say multiway calling won't quickly follow suit?
Basically, $8.5B for Skype is nuts.
It seems the one who really needed to buy Skype was Facebook who have no video calling to speak of. One wonder if Skype was "the last piece of chocolate cake" syndrome, meaning you want something you otherwise wouldn't just because it's the last piece.
Australia has small and expensive pipes to the rest of the world, and it shows up as caps and high prices. I'd be surprised if Australian telcos weren't working hard to degrade VoIP generally.
For my own part, I use Skype for almost every outgoing phone call. I spend perhaps 5 GBP/month on threshold auto-credit. The biggest problems with it happen with concurrent upload activity, especially torrents.
This was true 10 years ago but a lot has changed and it's fairly damning evidence of just how much the US has stood still on Internet access in the last decade.
200GB/month ADSL2+ for $50/month (+$30/month "phone tax"). In NY I have Time Warner Cable 50Mbps but it's basically capped at 250GB and I think I pay $80/month for it.
But there are three important advantages Australia has in this regard:
1. The caps are known and advertised. In the US they are far more surreptitious;
2. You get what you pay for. If you pay for 200GB, you get 200GB. There is no hiding behind "fair use" or nebulous definitions of "unlimited". This also means that a low traffic user can pay as little as $30/month for their ADSL2+ connection. Nor do you get labelled a bandwidth hogged and get transferred to some incredibly oversubscribed network if you dare to download (common practice in the UK); and
3. If you wish, you can pay for and get 1TB+/month. Where I am, my only choices are TWC and crappy ADSL1 providers. If I wanted >250GB/month I couldn't get it.
And all this is the current system. Australia is in the early stages of rolling out FTTH (fibre to the home) for ~95% of the population with structural separation between providing wholesale and retail services.
So I wouldn't be too quick to crow about Internet advantages in the US over Australia (or anywhere really).
This is not the case. barrkel's statement is outdated and inaccurate.
"Each of the four networks that will be providing the bulk of international connections for Australia is capable of carrying at least a terabit per second of data. The total international capacity in use for the Australian market in 2009 is estimated to be around 300 gigabits per second. Accordingly, total capacity usage could double, then double again, then double again, and then double yet again before the capabilities of those networks was exhausted. It would therefore be difficult to say that international networks are a capacity bottleneck in the Australian market."[1]
Another cable link currently under construction will double Australia's current capacity. [2]
Higher speeds seem a lot more ubiquitous in the US as opposed to here though. I live in one of the largest cities in the country, and my choices are dial-up, ADSL (to an exchange 5+km away), or cable from a single provider (who charges relatively highly for their services). From what I can see, the US appears to be much better in this regard.
I have family who are on 2GB plans for $50/mo, and they regard that as fairly good. The reason we're rolling out a (government-owned) broadband network is because we need it.
I lived in China and regularly had to contact people in Europe. I tried a lot of things, but in the end, Skype was the best overall experience, far better than Google Voice, especially in video. I had a fairly low bandwidth (3 MBps), but quality was fine.
When I try to call land lines in New Zealand, I consistently get an extremely poor connection.
You get that talk delay which can totally ruin conversation flow.
The internet in NZ pretty bad but it surely can't be that bad. It's kinda made me think about putting on tin foil hat and think there's some kind of Telecom [monopoly telecoms company in nz] shady service degradation going on.
I make regular Skype video calls from Perth Australia to by brother in Mountain View and the video and audio quality is excellent. We both have decent but not stellar bandwidth (~4Mb/sec at my end) but I think it also comes down to having good hardware.
Tldr: Cringely believes Google is the next Microsoft. Microsoft is worried about its future and bought Skype so Google wouldn't buy Skype. Cringely believes Apple, however, is a magical unicorn that Ballmer cannot even comprehend.
It's interesting that while Microsoft-related Nokia in Finland is decreasing headcount, the southern neighbor Estonia's Skype is looking to potentially grow.
Here is what Microsoft should do with Skype and it's 140Million-member social network:
Beat Facebook. Turn Skype into Diaspora. (Specifically, take Skype's persistent chatrooms into the next dimension)
Integrate Skype with Windows Photo Album, Movie Maker, Spaces, blah blah. Mayke Skype a local application for managing your personal content -- photos, videos, thoughts, whatever.
Leverage Skype's encrypted P2P infrastructure to make truly privacy-protected social networking. Automatically send status updates and comments and stuff to a user's friends over the Skype network.
Make social network truly social, and not dependent on a central server.
Monetizations:
* ads in the the client software
* for-pay special privacy settings for business/paranoid:
An Enterprise version that runs inside a private (corporate) network, with centralized IT authority.
* For-pay broadcast-type features for self-promoters.
* For-pay "professional" and other custom front-end for more specifically-structure communities than Facebook's free for all pseudo-"Friend" relationship.
Let users import/export their data between Skype and other network and blog systems.
Skype could displace Facebook, making social networking better for everyone, and rain money on MS.
According to Cringely "Apple has no peer". I guess that depends on how you look at it. Apple's execution is unparalleled, but the broadness and disruptive nature of Google's strategy is hard to deny. The new Android Open Accessory Development Kit strategy, for example, is something I'd never expect to come from Cupertino or Redmond.
Apple did announce the APIs for iPhone accessories a year or so back with iOS 3.0. Scope and traction of Google's and Apple's specifications/APIs might vary.
MS v. Google? v. Apple? After reading this, and the comments, and a little thinking about it, the more this makes sense.
MS has a clear weakness in its lineup. Skype brings a bunch of existing technology and know-how, not to mention all those sweet, sweet users.
Multiply by some factor of Ballmer being an idiot, and 8.5 is almost reasonable.
Part of what convinced me - and I realize HN comments are anectdotal - was people's impressions of Skype and Google Voice (I've done no more than played with each).
From the sounds of it, Skype's biggest issue is its UI. MS has plenty of experience (and some success ;) with good UIs and backend work.
Other than that, it satisfies its basic function well: it makes the calls. It sounds like Google Voice, at least internationally, isn't as straightforward.
So, they get the users, and a jump on the tech. Okay, decent, but not great, business decision.
Will they turn it into something successful? Ehhhh, I have my doubts. Who knows? Ballmer isn't actually an idiot; maybe he's learned something by now.
And the $8.5 billion price? That was effectively set by Google, not Microsoft. Ballmer would have paid anything for Skype. $8.5 billion is just the price at which Google feels it is better for them to build rather than buy.
That's not really 8.5 bil for Skype. The cost to develop that would be a lot less. That's actually 8.5 bil for 140 million active users. That's about $60 a head. Not a bad deal for a big company in the telecom/mobile hardware space.
Yes, I can't imagine how anyone would expect people to take them seriously when they write blatant fanboy crap like this, while commenting about Apple's competition.
I can't agree with this. The basis of it all doesn't make sense:
> Were Google to buy Skype ... they’d build a brilliant Skype client right into the DNA of Android
Google has had loads of opportunity to build VOIP functions into Android and has dragged their feet all the way. They already have a a voice chat service and it has no presence in Android (edit: yes, just now they released video chat, but only for a tiny percentage of phones). The latest versions have some SIP functions but it's clearly been kept obtuse enough to prevent any mass consumer take up. Google is heavily constrained by needing not to offend the carriers. The idea that they would en masse integrate something that would destroy their business models is delusional.
>the contacts it contains are often better ones than Facebook offers.
Really? That's not my experience. The contacts I have on Skype are the people I call from my computer, not all my friends.
For instance, I don't call my coworkers from Skype, because all their numbers are on my cell phone. I don't call my close friends, because al their numbers are on my cell phone.
In fact, the only contacts I have on Skype are the out-of-town people I video call (my parents, my sister, my niece) and the places I order food for delivery.
strangely, to me Skype deal looks like Storagetek:
1.obsoleting technology (Skype's power is Internet (typically PC, not mobile device) to "real phones" only enabled endpoints - this power is diminishing with communication networks growing today in any other segment except the segment of "real phones"-only enabled endpoints)
2.and commoditization of the rest of their technology - i.e. speech and video over Internet, and their technology not even being better
3.and no noticeable presence in disproportionally growing and more numerous segment of devices - mobile
The Skype was just becoming a niche player (in its old niche) and one among many in the rest of the telecom world.
He sure has a lot of confidence on how successful Google would be with Skype but that doesn't really jive with reality.
Google's only successful home grown products are Search and Gmail. Android and Youtube are the most successful acquisitions. Voice, Double-Click, and Analytics are doing ok, and then there are about three dozen failures. It is ok to fail but people shouldn't pretend everything Google touches turns to gold. Skype probably has just as much chance as succeeding with Microsoft as it does with Google.
I think Microsoft will leverage its relationship with facebook and use skype as their alternative to apple's facetime. Though I am worried about the future of Skype's linux client.
Skype+Kinect+xbox can bring video calling to living room. Also, Skype could be a great addition to Windows mobile phones. I think these two might be the main reasons for Microsoft to buy Skype.
Now depends on how well Microsoft does Skype integration with their products.
The reason behind this acquisition is signaling to the market, and to Microsof's competitors, that MS is still strong and wants to play as a leader in the market.
This acquisition is not justified by business reasons, it's a matter of game theory ;)
there are talks about skype integrating with television sets. Think its LG and more to come. Xbox sits next to that tv and is one of the successful products in it's stack. maybe msft wants to be part of your living room?
It should be the default understanding that what someone says and writes is their opinion.
Not having that as the default is how we ended up with the terrible popular style "in my opinion it could be argued that for some people it is mostly better if they XYZ, where possible (consult your doctor)".
NB, when I say it's a terrible style, that's my opinion, not a universal truth or peer reviewed fact cited in a published journal.
I'm not so sure. I agree that weasel words can destroy a piece of writing, but a complete lack of them can come off badly too. The main effect of killing the qualifiers in your writing is increasing the confidence in the tone of the piece. Obviously, we all have different levels of confidence in our many different opinions, and if you stop using qualifiers all together, you lose the ability to distinguish between different points on the confidence continuum.
If I write with the same confidence about two opinions I have, one I am vey sure of and one I am doubtful about, then I have failed to communicate well. Furthermore, writing in a way that expresses complete confidence in your opinions can change the tone of the conversation that it sparks. When you qualify your opinions, you signal that you are more willing to discuss that point. Speaking with complete surety can shut down a comment thread or turn it more antagonistic.
I like your point that the author can assign different levels of confidence to different parts of their writing, but the reader shouldn't automatically mistake the confident sections for facts and the unconfident sections for falsehoods, that seems to be conflating two signals into one.
When you qualify your opinions, you signal that you are more willing to discuss that point. Speaking with complete surety can shut down a comment thread or turn it more antagonistic.
Generalities aside, the criticism of the post stands. It's pretty vacuous, offering no new information or insight.
Some writers online actually do have knowledge of Google's or Microsoft's position with respect to Skype, so when they say "Google/Microsoft wants X," they mean something more factual than "I can speculate that Google/Microsoft wants X."
In particular, I've heard from more informed sources that Google passed on Skype and has its reasons, contradicting one of the post's few concrete assertions.
But there is something: SAP. What Microsoft should do is take on Oracle and IBM instead of Apple and Google. They should make an offer to that large number of companies who want one thing more than everything else: Peace of mind based on an integrated stack. They are ready to pay up. Microsoft is the master of integration (some call it lock-in). Together with SAP, Microsoft has the most complete enterprise stack imaginable. All of a sudden even Windows Phone would have a place in this world as a BlackBerry successor.