The announcement Tuesday May 10 that Microsoft paid $8.5 billion for the online voice and video service, Skype, has prompted much speculation as to Microsoft’s motives and the future of the Skype service.
By any estimate, the deal was overpriced for a company that last year made a net loss of $7 million on revenues of $860 million. The projected Initial Public Offering for Skype was estimated at 50 percent less than what Microsoft paid for the service. This is Microsoft’s largest ever acquisition but still represents a small fraction of the software giant’s massive wealth. Microsoft has a net worth of around $220 billion.
Skype was first launched in 2003 by software developers Niklas Zennström and Janus Friis. The two had previously developed the peer-to-peer file-sharing service Kazaa. Skype is based on the same underlying technology, which allows the service to utilize the power of user’s computers rather than investing in expensive server technology. More...