Microsoft deal will expand Skype reach


  • Technology
  • Wednesday, 11 May 2011

Microsoft Skype 2

SAN FRANCISCO: Imagine using your Xbox and switching from a game to a video chat with a faraway friend holding an iPad. Or going into your office e-mail to invite grandma to a virtual family reunion beamed on TV sets to relatives across the country.

Microsoft’s purchase of Skype is supposed to make using the Internet for video phone calls as common as logging on to Facebook or instant messaging is today.

If it wins regulatory approval, the deal provides Microsoft, the world’s largest software maker, with the means to sell more digital advertising and offer more popular conferencing tools to help businesses save money.

Skype’s services also span hot markets — online socialising, mobile phones and digital video — where Microsoft has been struggling to catch up with Facebook, Apple and Google.

Analysts and investors couldn’t seem to agree whether Microsoft is wasting its money on an unprofitable service or has pulled off a coup that will help it restore clout. Microsoft stock was virtually unchanged, falling 0.6%, after the deal was announced.

About 170 million people worldwide use Skype regularly for calls and chats. Microsoft believes it can attract hundreds of millions more by weaving Skype into its products. Not just Windows, which runs on eight of every 10 computers and servers on the planet, but also its Outlook e-mail program, software for phones and the Xbox videogame console.

Microsoft already has a Skype-like service called Windows Live. But the real Skype is far more popular and bridges different computers and phones. Already, someone using the Skype application on an iPhone can talk to someone who has it installed on a Dell laptop.

For businesses, Microsoft has separate communications software. Building Skype into it would make it easier for corporate users to conduct video chats with people at other companies, or from home, said Bern Elliott, an analyst at the research firm Gartner Inc.

Microsoft pledged to keep Skype in all the places it is currently available, including mobile devices that run of the software of two major rivals, Apple and Google.

Skype users don’t have to pay to install the software on Apple’s iPhone, iPad computer Tablet or devices running on Google’s Android system.

The new ownership probably means more advertising in Skype’s video services along with potentially compelling new uses. Skype only recently began experimenting with ads. Microsoft, which has a much larger sales team, intends to expand them.

The partnership would also bring Skype to the Xbox videogame console, which has sold 50 million units, making it the world’s No 2 videogame system behind the Nintendo Wii.

Already, players using the Kinect motion-sensing controllers can videoconference with each other.

The Microsoft-Skype partnership means a player could one day put a game aside and use the Xbox to call anyone else who has registered for a Skype account.

It’s also conceivable that Microsoft could expand Skype’s video chatting services into Facebook, the social networking site that has more than 500 million users of its own. Microsoft owns a 1.6% stake in Facebook, and both have an interest in cutting into Google’s power.

Microsoft can easily afford the purchase. At the end of March, it had a cash hoard of US$50.2bil (RM151bil).

Because Skype is based overseas, Microsoft plans to pay for the deal from the portion of cash that Microsoft holds overseas to avoid higher taxes in the United States. The company hopes regulators will approve the Skype takeover before the end of the year. — AP

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