The news is making the rounds that Microsoft is paying a large amount of money for Skype, approximately $8.5 billion in cash.
It is virtually guaranteed the acquisition will lose money. EBay tried their hand with Skype back in late 2005 and they only had to pay $2.6 billion for the privilege before they threw up their hands in late 2007 when they dumped the company for a loss.
Now Skype has found a bigger sucker to sell itself to, which in this case is Microsoft.
All of these value investors that have their money in Microsoft have to be wondering what Steve Ballmer is thinking, and how much more money Microsoft will run themselves through before realizing that it has gotten to the size where it is unable to compete effectively outside of its Windows/Office monopoly.
“Microsoft will run themselves through before realizing that it has gotten to the size where it is unable to compete effectively outside of its Windows/Office monopoly”
XBOX 360 SAYS HELLO.
(I agree though – what were they thinking?? They could build Skype (like Google did with Voice) and give free calls including internationally for 10 years for less.)
You’re right about their entertainment division.
Microsoft is such a huge money-maker that their gaming segment (which reported $1.3B operating income in the past 9 months) is a drop in the bucket compared to the rest of the company. I’m not sure how much they can scale up that division, but one contributing factor was that the Kinect was a major accidental success.
The big difference is that MSFT has to compete against players like Sony and Nintendo, and indirectly Activision (World of Warcrack), hence the margins aren’t exactly huge like they are with Windows/Office.