Why did microsoft pay $8.5bn for skype? is it because it wants to beat google

Was software giant Microsoft’s biggest ever aquisition a costly case of verb envy or a shrewd move in the battle to secure the digital future from its rivals Google?

It’s a technology word which, like Google, has become a verb in its own right, a word that stitches together software engineering talent in Estonia to a corporate headquarters in Luxembourg.
Last week, Skype also became the world’s most expensive verb when Microsoft paid $8.5bn (£5.2bn) in cash for a company best known for linking families and friends in online video conversations across the world. “I’ll Skype you,” is now a common refrain.
Steven Ballmer, Microsoft’s ebullient chief executive, could barely contain his excitement at a press conference in San Francisco last week to announce the deal.
Within minutes, many had diagnosed a costly, if not deadly, case of verb envy. Microsoft, after all, has never come close to moving its status beyond that

of a proper noun during its 36-year history. And though the millions of dollars ploughed into Bing, its search engine, have wrestled some market share from Google, everyone knows which one the verb is.
Those sceptical about Microsoft’s biggest ever acquisition would have found enough in the filing Skype made last August as part of a planned flotation to harden that conviction. The technology firm made just $13m of profits in the first half of last year, admits some users may be double counted and can’t be sure how they will react to more advertising on Skype.
For those convinced that Silicon Valley is in the grip of a second internet bubble a decade after the first burst, Microsoft also just saved fund managers from a severe case of indigestion on overpriced Skype shares. It was a rescue that came, of course, at the expense of shareholders in Microsoft, which remains the world’s biggest software maker and made $5.2bn in profits last quarter.
That’s not how Ballmer sees it. Like most of the companies that are using the internet to reshape the world, the video and talk services that Skype offers users are largely free.
One exception is a product that allows several people to hold video conversations with each other at the same time, and Tony Bates, the British chief executive of Skype, would have found it useful over the past two months.
Looming out of their respective screens would have been Facebook founder Mark Zuckerberg, Larry Page, the chief executive of Google and John Chambers, the boss of Cisco. Like Ballmer, all were interested in buying the company founded just eight years ago by one entrepreneur from Denmark and another from Sweden.
Whatever the price tag each would have hung on Skype, all, along with iPhone and iPad maker Apple, know that the ground beneath their feet – however big they may be – is rapidly shifting. Boundaries that for the past 30 years kept phone, video, and written communication apart are collapsing as desk-bound computers retreat and mobile devices that allow people to march forward.
And though the landscape is a dizzying one, all the companies know the scale of what’s at stake: the chance to deliver the technology, platforms and devices that billions of people are likely to use to communicate with for decades to come.
“We’re definitely in the middle of a transformative period and it will take a few years to play out,” explains Al Hilwa, who tracks these companies for technology research group IDC. “You don’t want to be sitting on the sidelines.”
Though fast-changing, a current crop of winners has already emerged during the past decade.



Why did microsoft pay $8.5bn for skype? is it because it wants to beat google