Microsoft Looking to Buy Skype

Last week, I saw a L.A. Times tweet stating Google or Facebook might buy Skype. Facebook would buy Skype to fully incorporate it with their social media creating a Skype-facebook service which would bring FaceBook to another phase of communication; it would be a genius move for Facebook. Previously when reading about Groupon refusing Google’s buyout offer, I learned that Google has had a bad experience moving into social media; thus, I could not see that collaboration happening. Yesterday, I read Microsoft is most likely to buy Skype. “Microsoft Near Deal to Acquire Skype” by Anupreeta Das and Nick Wingfield reports the deal may be close and the price tag is estimated between $7 billion and $8 billion.

Skype would become an extension of Microsoft’s efforts to further market their brand and gain market share. Beyond XBOX and their office suites, Microsoft has their mobile operating systems, kinect, and Bing (all three have major competitor[s]). Skype could give Microsoft many ways to utilize the service and possibly bring Microsoft the popularity of Skype. The article reports integrating Skype to the Windows phone might not be the easiest route as “Skype could give consumers a way to make cheap phone calls over the Internet from mobile phones, without paying higher rates to the carriers” and carriers wouldn’t support a Skype phone.

The only problem with the deal is profitability. While Skype is very popular and has received amazing support from new outlets and celebrities, Skype makes little profit:

“[Skype] has produced little net profit in the eight years since it was founded. Profits continue to remain elusive as the company expands its business world-wide. Last year the company posted revenue of $860 million and $264 million in operating profits, but still had a loss of $7 million. The has $686 million in long-term debt as of Dec. 31”

Microsoft or any future owner of Skype must come up with a plan to make money with Skype. Unfortunately, this could mean future limited free service to raise more revenue from paid features. I previously wrote that CEO Tony Bates had planned on getting Skype into the business communications field to generate revenue. At the time of that post, December 2010, it was reported only 6.5% of Skype users were paying for service.