How eBay Sold Skype, or How Microsoft Screwed Up

Patrick Nosker May 10, 2011 0

eBay thought they were turning a new leaf and expanding their offerings when they purchased Skype from the makers of Kazaa and the FastTrack filesharing protocol. In October 2005, investors thought this was a great idea and dedicated $2.6 billion to acquire it.  Only two years later, In September 2007, the eBay Board was being chastized for making such a dumb decision. They were forced to write off $1.4 billion because of the Skype flop. Still, eBay CEO at the time, Meg Whitman, supported the decision to buy Skype.


It wasn't long after, in November, that she was rumored to be removed from the position due to the lack of productivity from the Skype brand.  Now, eBay and its Skype spinoff holding company have successfully reaped the benefits of the Skype brand by selling it for a cool $8.5 billion. Some called them cocky when they wouldn't consider selling for less than $7 billion.  Credit this to Skype CEO Josh Silverman's ability to turn the company into something with no real business plan into a tool used for many long-distance interviews, meetings, and even ABC News for their contributing advisors for national television.

Meanwhile, Microsoft had developed their own video conferencing solution, NetMeeting back in the Windows 95 days. Instead of building NetMeeting into a world class service and client, Microsoft decided to do what they often do, create new products that compete with their old ones and keep churning staff and developers so that nothing truly great gets made. Later came Windows Messenger, MSN Messenger, and Windows Live Messenger which were all never fully embraced by America. Instead they were the messenger clients of choice for Europeans and some Asians. Now, because of Microsoft's inability to create good products outside of Windows, Office, and Xbox, they paid the largest sum of money they ever have to buy a pre-made solution for video conferencing. 

Microsoft is the loser here and eBay and the Skype group are the winners. Hopefully Microsoft can successfully take advantage of the Skype service and name and turn it into something more by integrating with their Xbox brand and Windows, but it's just as likely that they will squander their $8.5 billion toy and turn it into something nobody wants to use.

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