There have been rumours for months about the possible acquisition of VoIP giant Skype by the likes of Facebook or Microsoft, and those rumours seem to have come true with Microsoft reportedly paying $8.5 Billion in cash for the company from Ebay.
Skype has been in corporate hands before, with Ebay purchasing the company for $2.6 Billion in 2006 before selling the company on to a group of investors including Silver Lake, Index Ventures, Andreessen Horowitz and the Canada Pension Plan (CPP) Investment Board in 2009 for $2.75 Billion. It is quite clear, then, that those investors have done very well out of this deal which is the largest in Microsoft’s history.
As with the Ebay purchase, much of the discussion now is how Microsoft is going to be able to turn the company profitable (it lost $6.9 million last year on revenues of $860 million). Skype has a very impressive userbase of 663 million ( and 170 million of them regular users), with 8.8 million paying customers, and is the de-facto VoIP brand with both consumers and enterprise, and is the service people turn to when calling overseas due to both the cost (free) and the market penetration meaning even my Grandmother knows what it is and uses it regularly. It’s market dominance depends on the freemium business model, and whilst some are calling this the death knell on the free ride, that is unlikely to be the case.