Microsoft made the headlines on May 10, 2011, when it acquired videoconferencing giant Skype for a reported $ 8.5 billion.\u00a0 Following the antitrust procedure of the Hart-Scott-Rodino Act, the companies filed a pre-acquisition notification to the various government bodies, required before the deal can be finalized.<\/p>\n
Generally, the companies need to show that the acquisition will not make the market uncompetitive, or be harmful to consumers.\u00a0 On June 17, 2011, the FTC approved of the proposed deal, but the companies are still waiting on approval from the European Union and the U.S. Department of Justice.<\/p>\n
Skype was founded in 2003, acquired by eBay in 2005, then sold by eBay to Silver Lake Partners in 2009.\u00a0 Skype reported nearly 700 million registered users and had an overall profit of $20 million in 2010.\u00a0 Despite these promising metrics, Skype also carries a long-term debt of $686 million \u2013 this has been significant enough for Skype to indefinitely postpone its IPO, which it filed for last August.\u00a0 As such, this acquisition by Microsoft is likely a boon for Skype and Skype\u2019s investors.<\/p>\n
Microsoft stands to benefit equally in the biggest deal in the company\u2019s 36-year history.<\/p>\n
First, the deal allows Microsoft to diversify and redefine itself as a major player in the intersection of communication and technology.\u00a0 Microsoft can suddenly serve a competitive offering against the likes of Cisco\u2019s WebEx, Apple\u2019s FaceTime and Google\u2019s Google Voice, not to mention quickly rising smaller companies such as ooVoo.\u00a0 Perhaps just as important is the fact that Microsoft\u2019s acquisition keeps Skype out of the hands of competitors, namely Facebook who reportedly also considered bidding for Skype.<\/p>\n
Second, Microsoft will be able to greatly expand its business model.\u00a0 The majority of Microsoft\u2019s profits are still derived from its two flagship products: Windows operating systems and Office applications.\u00a0 Now, there are already plans to broadly integrate Skype videoconferencing and messaging technology into the Windows Phone and Kinect\u2019s functionality, and Xbox and Outlook\u2019s interface, to name a few.<\/p>\n
Recent developments have surfaced concerning the pending acquisition.\u00a0 First, eight top Skype executives have left the company since the acquisition was announced.\u00a0 This was reportedly a move to save money because their stock options would have been worth far more if they were released after the acquisition.\u00a0 This might have the unfortunate side-effect of initial integration headaches.<\/p>\n
Second, Skype\u2019s interesting employment contracts have been brought to light.\u00a0 Specifically, reports have surfaced that Silver Lake has a so-called repurchase right, camouflaged in legalese and a long non-descript paragraph, that allows them to buy back\u00a0vested<\/em>\u00a0Skype employee shares at the grant price.\u00a0 This makes the shares literally worthless to the employee, and completely undercuts the incentives that vested shares are designed to reward.<\/p>\n This deal comes at an opportune time for both parties.\u00a0 Microsoft\u2019s competition, notably Apple and Google, have continued to innovate better and faster than Microsoft in recent years.\u00a0 This move ensures that Microsoft isn\u2019t left behind.\u00a0 Skype on the other hand may find a way to leverage Microsoft\u2019s ubiquity to reduce its debts.<\/p>\n","protected":false},"excerpt":{"rendered":" Microsoft made the headlines on May 10, 2011, when it acquired videoconferencing giant Skype for a reported $ 8.5 billion.\u00a0 Following the antitrust procedure of the Hart-Scott-Rodino Act, the companies filed a pre-acquisition notification to the various government bodies, required before the deal can be finalized. Generally, the companies need to show that the acquisition…<\/p>\n","protected":false},"author":10,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[8],"tags":[362,365,366,364,141,371,372,374,363,368,376,378,369,370,72,377,367,373,375],"ppma_author":[2085],"acf":[],"yoast_head":"\n