Microsoft’s $8.5 billion purchase of Skype is one of the Redmond giant’s boldest plays to create new markets in its 36-year history. The deal, Microsoft’s largest ever, is hard to justify on purely financial grounds — the company is paying 32 times operating earnings (EBITDA).
Moreover, it may not have been worth the price to snatch the prize from Google, which already competes in this field with Google Voice. The upside lies in new markets that this combination can capture. What do lessons from successful market creators suggest about the blue-sky potential?
Each of these possibilities creates intriguing upside for Microsoft. The company can go far beyond its historic role as a software colossus to create new ways for both enterprises and consumers to interact. With a strong presence in corporate IT, consumer desktops, and the living room, Microsoft offered synergies for Skype that other rumored suitors such as Google lacked. We shall see if the execution of this deal lives up to its potential.
Story by Steve Wunker.