Microsoft Acquires Skype

Chances are (if you work in the tech industry) that you’ve heard the acquisition story of the year thus far: Microsoft has bought voice and video chat giant Skype for $8.5 Billion. ┬áSkype has 663 million users worldwide, more than Facebook (600 million) or Twitter (200 million).

Microsoft is certainly not new to the voice and video chat game (it added voice and video chat in 2001 with MSN Messenger 4.6), but use of those capabilities is not popular. (In fact, I’ve used it since around that time and I had to research whether it could do voice and video myself.) Skype, on the other hand, has been the standard for free peer-to-peer VOIP chat since its inception in 2003.

So, what does this mean for us as consumers? It’s hard to say, but probably nothing good. Let’s review some of Microsoft’s previous acquisitions and their outcomes. First, the bad:

1. Fox Software – Makers of FoxPro database system. Bought in 1992, maintained and integrated into Microsoft’s Visual Studio IDE as Visual FoxPro, then halted development and maintenance in 2007. No plans for a new version so far.

2. Vermeer Technologies – Original developer of FrontPage, Microsoft’s first WYSIWYG HTML editor. Integrated into Microsoft Office suite from 1997-2003, then replaced by other MS products.

3. WebTV – ISP and internet browsing appliance manufacturer. Most people remember these; it allowed you to browse the web on your TV. Purchased by Microsoft in 1997, rebranded as MSN TV in 2001, no new hardware since 2006.

4. FASA Studio – Video game wing of board game manufacturer FASA, famous for games such as Battletech and Warhammer. Microsoft bought the divison in 1999, two years before the company collapsed on itself. It now only exists to collect licensing royalties from its past properties, and Microsoft’s FASA Studio shut its doors in 2007 after releasing just seven titles.

5. Rare Ltd. – ┬áThose of us who grew up in the 90s fondly remember Rare. They created some of Nintendo’s greatest titles of that era (Battletoads, Donkey Kong Country, Killer Instinct, Goldeneye, Perfect Dark). Unfortunately, after they were acquired by Microsoft, they’ve drifted along as a second-rate handheld and XBox 360 Console developer.

Now, the good:

1. Bungie Software – If you don’t know who Bungie is, I have one word for you: HALO. Bungie was acquired in 2000 during the end of the original Halo’s development cycle after close to a decade as a small but well-received Macintosh game developer. Microsoft saw Halo as the perfect flagship game for their upcoming entry in the video game console wars, the XBox. Halo has spawned a total of six games and is a billion-dollar franchise. Despite all this, Bungie retained almost complete autonomy and creative control, and in 2007 they split off into a privately held LLC with Microsoft retaining a minority stake.

2. Visio Corporation – Developed its eponymous diagramming software throughout the 90s and was bought by Microsoft in 2000. Since 2003 has become a member of the Microsoft Office family and is very popular in corporate environments.

3. Hotmail – Anyone who thought the words “free email” before Google’s GMail debuted in 2004 would likely point to Hotmail, acquired in 1997 by Microsoft. Hotmail was literally the first web-based email service and Microsoft has dedicated itself since that time to keep Hotmail’s reputation as the consumer’s first choice in free email.

Now that we see all of these purchases as they have played out over the years, what can we conclude about Microsoft’s behavior towards the management of their acquired assets? The good thing is that Microsoft does have a track record of letting products continue, at least for a time, testing their viability in the market. The bad news is that Microsoft already has a stake in what Skype does: Video and voice chat via their Live Messenger product. I’d expect very little to happen at first, but the infrastructure, features, and resources will slowly bleed into Live Messenger, leaving only superficial differences between the two products. Five to ten years from now, Skype will probably be phased out, users offered incentives over time to migrate to the new, improved Live Messenger with development intentionally slow and dogged on the Skype program. Finally, it will cease its services altogether.

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