Will Microsoft and Skype be able to make a profitable history together?

eBay bought Skype for $2.5 bn in 2005 and in 2009 sold it off for $2.75 billion  to a group of private investors including Silver Lake, Index Ventures, Andreessen Horowitz and the Canada Pension Plan (CPP) Investment Board.

In 2010 sources claimed that Facebook and Google were trying to strike off a deal with Skype with an acquisition deal for a price of $3-$4 billion or a possible joint venture being considered.

But those all turned out to be rumors. As the events turn out on 9th May, 2011 Microsoft purchased Skype for a total of $8.5 billion in cash, making it one of the most expensive acquisition made by the software giant.

That kind of news and money raises a lot of questions and gives way to many of speculative answers. Here’s what we’ve gathered.

Q1. What does Microsoft intend to do with Skype? What does this acquisition imply for Skype’s online competitors?

Here’s a list down of what we think the motivations behind the acquisition are:

The immense 170m consumer base of Skype with 8.8m paying customers – Major attraction for Microsoft.

40% of Skype’s activity is video – Microsoft has a history of investing and expanding video advertising.

Skype plays an active role in mobile communications – The usage of Tablets and Smart phones in contrast to desktop PCs are one the rise. Using Skype gives Microsoft the leverage to make room for online activities via mobile devices paving the path for Windows Phone 7, especially in the context of Microsoft/Nokia partnership.

Possible Integration of Skype with other Microsoft products like Kinect, XBOX and Outlook could take Skype to a whole new level.

Growth in mobile and the developer culture seems to be the most significant aspect for the acquisition’s long-term agenda.

Q2. Was $8.5 b too high a price as the delayed IPO would have paid less?

Skype’s yearly revenues are approaching $1 bn and the acquisition keeps the brand out of the reach of other competitors. Sure, the delayed IPO would have paid less but if Microsoft can build up on its Enterprise plan with Skype, isn’t the money being invested wisely?

Steve Ballmer (CEO Microsoft) and Tony Bates (CEO Skype) at the official Press Conference.

Here’s the underlying question: This is one of the most historical acquisitions in the online world. But will Microsoft and Skype be able to make a profitable history together?

What do you guys think?

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