Microsoft confirms $8.5 billion Skype purchase

www.thelocal.se ^ | 05/10/2011 | TT/The Local/pvs

[WesternCulture]

Skype, the IP telephony company founded and part-owned by Swedish entrepreneur Niklas Zennström, has been bought bought by US software giant Microsoft, the firms confirmed on Tuesday afternoon.

The statement confirmed speculation over the deal to buy the firm, whose product allows users to conduct video and telephone calls over the internet.

Microsoft confirmed that the deal is worth some $8.5 billion, dwarfing the $6 billion the US firm paid for online advertising firm aQuantive in 2007 and its largest acquisition since its founding in 1975.

The news of the pending deal has shocked analysts who consider the price to be a considerable premium for a firm which has consistently struggled to generate profit.

"It is going to be a very exciting year," said Helena Nordman-Knutson, a telecom analyst at Öhman Fondkommission referring to the highly competitive global telecom market.

There are suggestions that Microsoft plans to integrate the service into its Xbox 360 games console, according to a report in the UK Guardian.

Microsoft were on Tuesday morning unwilling to comment on the report, Skype was meanwhile unavailable for comment.

Niklas Zennström founded Skype together with Dane Janus Friis in 2003 and the firm was declared one of the success stories of the early internet age when it was sold to US auction website Ebay for $3.1 billion in 2005.

Zennström and Friis shared around $2.5 billion from the deal.

Despite rapid growth in user numbers Ebay sold around 70 percent of the stock to a group of investors comprising of Silver Lake Partners, CPPIB, Andreessen Horowitz, and the original founders - returning Zennström and Friis a 14 percent stake in the firm.

While the number of people using Skype has grown in recent years, revenues remaining small due to the low numbers of users paying for services. The firm has posted losses in four of the last five years.

Previous rumours have circulated in May linking Skype to takeovers by Facebook and Google. In talks with these companies Skype has been valued to $3-4 billion.

[WesternCulture]

Especially over here in Sweden, it is often pointed out that none of my nation's large, globally successful companies in fact was founded after WWII (However, IKEA was founded during that war, which perhaps says something about the business skills of founder Mr. Ingvar Kamprad).

Skype, founded in 2003, is the most evident exception to that rule so far - whatever happens now when Microsoft is in charge of the company.

Since the wake of the 1990’s, when more or less everyone in crisis-stricken Sweden begun to realize something was severely wrong with our traditional, Socialist, cradle-to-grave welfare society, the economical development of Sweden has been considerably strong. Today, Sweden's annual GDP-growth is the strongest of all fully industrialized nations (up 7.3% from fourth quarter 2009 to fourth quarter 2010) and entrepreneurship is on the rise.

This development has been guided by low corporate taxes, major income tax cuts (for all segments of the population), close collaboration between universities, business life and various levels of government as well as major investments in areas like infrastructure and education.

The success of the Swedish IT industry and the rise of Stockholm as one of the World's major IT hubs might never have taken place if Sweden would have continued to rely on the kind of political model Obama today is working hard to introduce on American soil..

[JoeProBono]

DONATE

[WesternCulture]

- Yes and I’ll tell Niklas Zennström to do so too.

He can afford it and the members of this forum do a lot promoting Capitalism and entrepreneurship, don’t we?

Cheers!

[iowamark]

I know a lot of people who use Skype, but only because it is free. What a business model!

[JoeProBono]

ORLY?

[Cronos]

I’m not sure this is a good thing.

[4rcane]

I use it, because its free, but I would use gmail voice chat just as easily which only uses the internet browser

[4rcane]

microsoft should simply make their instant messanger more skype-like instead of wasting $8 billion imho. It be a lot cheaper

[WesternCulture]

“I’m not sure this is a good thing.”

- Neither am I but, like said above, from a Swedish perspective it's comforting to see that the orientation away from Socialism and towards free market principles has resulted in successful entrepreneurship (even if Skype, admittedly, has been struggling with poor profitability) in my country.

In general, I think American and Scandinavian business culture have a lot in common and the acquisition of Skype is not the first example of American-Swedish cooperation in the IT sector. For instance, IBM has been one of the largest employers in Stockholm for decades and since many years back, Microsoft has cooperated closely with Ericsson (not only regarding Sony Ericsson cellular phones per se; Ericsson's core business isn't the phones, but telecommunication “infrastructure” so to say).

[Steve Van Doorn]

yeah no kidding. skype is good but it could have a lot of improvements such as multiple party lines and push to talk

[dennisw]

You are a tireless promoter of Sweden which seems like a great place to live. My question is-— Do you have important agriculture and fishing sectors that provide most of your food? Do you grow a lot of grains there like wheat and rye? Do you raise a lot of the meat (livestock) you eat? Or do you import most of your foodstuffs?
Lastly — Americans eat this dish called Swedish meatballs. Are you sick of eating those? (lol)

[dixiechick2000]

“Do you have important agriculture and fishing sectors that provide most of your food? Do you grow a lot of grains there like wheat and rye? Do you raise a lot of the meat (livestock) you eat? Or do you import most of your foodstuffs?”

I wish that we, from the USA, could say that we have those, and don’t have to import our commodities, and that we have a manufacturing base.

But, we can’t.

So, WesternCulture, brag all that you want about your great country.

We are sadly lacking here at this moment.

And, I say “moment” because this “moment” will be over shortly.

[pepsionice]

Microsoft’s instant messenger has been around for a decade and should have been vastly improved over this period...but it hasn’t improved much at all. The guys who work for Skype are obsessed on making it better each and every month. So Microsoft is really buying the technology and the smart guys behind it. Face it...if they hadn’t bought Skype....then Google would have done it. Currently...Skype is basically free, which makes you wonder if Microsoft can allow that to continue on. My guess is that you will have to buy a Microsoft product in the future...probably for $49...with a piece of hardware (some special web-cam), to run Skype.

[4rcane]

not going to happen, if they start charging, i’m moving to gmail voice chat

[WesternCulture]

“You are a tireless promoter of Sweden which seems like a great place to live.”

- While I sure am proud of the things that truly are great about Sweden I also admit the flaws. Especially our insane immigration policy and the unbearable PC mentality.

Anyhow, “promoting” the aspects of Sweden that consist in producing competitive multinationals and maintaining Lutheran work ethics is just as much about promoting a sane, Christian culture based on Western ideals and Capitalism as giving praise to Sweden.

We should all be tireless promoters of what is good about our nations and discuss these matters with foreigners. For a long time, Americans and Scandinavians have nurtured such a culture and exchange of ideas, opinions and experiences and I hope you agree this is something benign.

Sweden produces all of the foodstuffs you've mentioned, but we also import a lot of food products from all over the World.

Even in really small Swedish towns you'll find “foreign” restaurants like Italian and Thai ones and in the supermarkets you'll have no problem finding tex-mex products, Chinese spring rolls, kebab meat, french cheeses, Greek olives and exotic fruits etc, etc. I'd say Swedes are more open minded towards foreign food than the French and especially the Italians are.

Yes, I know Swedish meatballs are rather popular in America. I'll never grow tired of meatballs, on the other hand I don't eat them very often.

About traditional Swedish food:

http://en.wikipedia.org/wiki/Swedish_cuisine

http://www.freeway.org/issue1/food/tidning.htm

A recipe of one the most popular Swedish dishes that's also really easy to prepare:

http://allrecipes.com/Recipe/janssons-temptation-janssons-frestelse/Detail.aspx

[WesternCulture]

“So, WesternCulture, brag all that you want about your great country.”

- Call it bragging if you wish, but please remember I've often expressed my admiration and support of USA on this thread as well as having criticized lots of aspects regarding Sweden.

To a large degree my point above is that Americans should be aware of how Sweden in the 1970s and 1980’s FAILED to construct a Socialist nanny state paradise. This tragedy is something I certainly don't wish to brag about and I hate hearing about how a great nation and a good friend of my country like the US today seems to be falling into the same trap as we once did. Giant national deficits and big governments will never produce lasting prosperity.

[napscoordinator]

Fantastic post. I was in Stockholm and loved it. What a beautiful country you have. I wish more Americans would travel and appreciate what the World has to offer but most Americans sit at home in their one stop light towns watching TV and wouldn’t dare leave the country to learn anything. Sad but factual.

[dennisw]

Thanks much for your post and that information. If your small towns have Thai or Chinese restaurants this is similar to America
Rye, oats and buckwheat are your traditional "staffs of life". They grow best at your latitude. Wheat too but less so.
Your posts have changed my image of Sweden. You are less socialist than I thought and maybe better than America with all the socialist nonsense Obama is trying to pull off
Helsinki, Oslo and Stockholm are all at a similar latitude (~59 degrees) and are the largest most northern cities. You are big bears looking downward on the follies of the world (I know you won't get this)

Anyhow, “promoting” the aspects of Sweden that consist in producing competitive multinationals and maintaining Lutheran work ethics is just as much about promoting a sane, Christian culture based on Western ideals and Capitalism as giving praise to Sweden.

A plus in my opinion...to be proud of. America is North European Protestant founded with a very solid Protestant work ethic that has gotten diluted over time and immigration though many immigrants got "brainwashed" into this Protestant work ethic. Plus most were hardworking anyway.

We should all be tireless promoters of what is good about our nations and discuss these matters with foreigners. For a long time, Americans and Scandinavians have nurtured such a culture and exchange of ideas, opinions and experiences and I hope you agree this is something benign.

I agree on this

[firebrand]

Maybe they won’t make the mistake that eBay made and will hold themselves back from selling off 80% to hedge funds.