Does Microsoft's £5bn bid to acquire Skype raise the spectre of the dotcom boom?
"We want to stitch together the world," said the exuberant Steve Ballmer, CEO of Microsoft, last week, annoucing the purchase of Skype. "We have big customer bases we can connect that can add all sorts of value."
The big question is whether Microsoft's energetic leader is gambling too much for too little return. While no-one doubts the growing power of social media, the business model for converting users into revenues remains largely unproven.
Companies such as LinkedIn, Facebook, Groupon and Twitter are being valued at multiples eerily reminiscent of the dotcom boom, leading to speculation that a bubble could be in the making. Josh Olson, technology analyst with Edward Jones & Co, says he remains "on the sidelines" as to whether Facebook is correctly valued. As for the Microsoft-Skype deal, Ballmer and his Skype counterpart Tony Bates, who will head up the online telephone division once it becomes part of Microsoft, will have to prove that they can deliver on promises to "extend our global community". "It helps move them along in mobile," says Olson, who like most agrees that Microsoft must hasten its push into the social internet space.
According to Kristy Dorsey of Scotland on Sunday the $8.5bn swoop on Skype could be Ballmer's last shot at reviving Microsoft, which last year lost the coveted position of the world's most valuable technology company to arch-rival Apple. Since then, speculation has persisted that the 55-year-old might be ousted as chief executive,despite his close relationship with founder Bill Gates and a roughly 4 per cent stake in the business.
"He
needs to do something big, bold and significant, not only to prove that
he knows what he is doing and can make big bets, but also to get the
company back on track," says Richard Edwards, principal analyst at Ovum.
The
pressure on Ballmer has intensified as his company has increasingly
lagged behind Apple and Google, both of whom have far outstripped the
meagre revenue growth figures posted by Microsoft in recent years. The
knock-on effects are evident: while Microsoft's stock has edged up 8 per
cent during the past five years, Google is up 35 per cent, and Apple
has surged by a staggering 395 per cent.
Polly Purvis, executive director of ScotlandIS, says Skype should add to the Microsoft-Nokia partnership announced at the start of this year. Under that agreement, the Finnish handset manufacturer is adopting Windows as its principle smartphone application as it and Microsoft collaborate on new mobile services to combat Apple's iPhone and Google's Android offering. "The purchase of Skype complements their recent alliance with Nokia, both of which signal a move into the mainstream consumer market," Purvis observes.
Elsewhere, Microsoft is likely to integrate Skype-type services within Xbox, allowing gamers to communicate directly with one another and effectively bringing large-screen, high-definition video calling into the comfort of the living room. Skype will also be worked into existing software products such as Outlook e-mail and Lync, Microsoft's business communications infrastructure.
Read the full story at Scotland on Sunday
