Microsoft buys Skype


Anupreeta Das and Nick Wingfield of the Wall Street Journal are reporting that Microsoft has purchased Skype for $8.5 billion. Read the article here if you have a WSJ subscription.

My first reaction is that it is another example that calls to mind Alan Greenspan’s famous “irrational exuberance” quote, since Microsoft is paying $8.5 billion for a company that lost $7 million last year. However, that reaction should be taken with a huge grain of salt, since it is just a gut reaction based on a recent reading of the news.

No doubt Steve Ballmer wants to put his stamp on Microsoft, and Skype boss Tony Bates will have made a name for himself as well. Whether it is good for Microsoft shareholders or is another sign of valuations running out of control, time will tell. My gut says it is the latter, as something better, newer, and cooler will come along before Skype manages a profit. However, if the Microsoft Skype division successfully fends off the natural drift toward bureaucracy, it could be the Skype division that finds that new thing. One thing is for certain, and that is that capital to invest won’t be an issue. Whether that spurs or hinders innovation is certainly up for debate.


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