Evil Empire Buys Skype

Hmm…. I never had a chance to use Skype.

All of my friends are using it; talking to lovers in Europe, or to spouses in other states, or to FB “friends” who are who-knows-where. It sounds so cool, so romantic, sitting in the familiar confines of one’s living room in front of a laptop webcam, conversing with a friend across the continent or across the ocean as if they were right there in the same room. Until now it seemed so cool that I just knew I’d have to be a Skyper soon.

But then Skype went and got sold to the Evil Empire for $8.5 billion, which seems to be an awful lot to pay just to keep me from becoming a Skyper.

Is Ballmer nuts or, more precisely, is he even more nuts than I already thought him to be, paying billions for a company worth thousands? Doesn’t Google own the patent on paying way to much for much too little? It seems I’m not the only one asking such questions. ZDNet’s Steven Vaughan-Nichols was just as incredulous as I after yesterday’s announcement. In Microsoft’s Ballmer $7.7-Billion Skype Blunder, he opined:

“Ballmer just burned more money than Oracle did on buying Sun for a video-conferencing and Voice-over-Internet Protocol (VoIP) company? Come on! The only thing that Skype has over any of the dozens of other video-conferencing and VoIP companies out there is brand recognition and Skype’s brand is not worth $850-million much less $8.5-billion.”

Now, before any Skype fan-boys get on soap boxes to tell Mr. Vaughan-Nichols and myself just how wrong we are, that Skype is worth every penny being paid and maybe even more, let me dig-up a few facts to explain our position. eBay bought Skype when it was a two year old start-up, in 2005, for $2.6 billion. A few years later, eBay was forced to admit to their shareholders they’d paid way too much. In 2009, they were happy to dump the company onto a group of investors for $2 billion, a $600 million loss. In the first six months of 2010, Skype finally realized a $13.2 million profit, after losing $99 million in 2009.

As I like to do sometimes, let me quote the great television sage, Thomas Magnum: “I know what you’re thinking…”

You’re thinking that Skype has to be worth gazillions of dollars because practically everyone on the planet is using it and it’s finally making a little bit of money. It’s true, Skype isn’t lacking users at all, but the key thing to remember here is it’s only making a little bit of money – after being around for eight years. I’ll let Mr. Vaughan-Nichols explain:

“Yes, many people use Skype for work video-conferencing? Why? Because it’s free, or the next thing to it, and it runs on Windows PCs, Macs, Linux PCs, and a host of other devices. Does anyone seriously think MS-Skype will really run as well as it ever has on non-Microsoft platforms? Get real. Nothing else ever did, why should Skype be any different?”

Microsoft has already announced intentions to make Skype available on the Xbox, meaning that gamers will now be able to politely converse with their real opponents as they pummel their virtual asses. And the smart money boys are saying you can bet Microsoft is really planning to use the acquisition to create a killer app for Windows Phone 7 – which can use all the help it can get. Good luck with that. As has been pointed-out elsewhere, cell phone service providers don’t care much for VOIP on their smartphones as it cuts into their profits. Don’t take my word for it, ask Apple.

My guess is that this acquisition will, in the long run, kill Skype. There’s not enough people who’ll be willing to pay enough for the service to justify the multi-billion dollar price tag. None of my friends who Skype could afford to pay more than pennies – and there are other similar services waiting in the wing, as Joe Brockmeier blogged on NetworkWorld:

“There have been efforts to replace Skype with FOSS solutions, but none of them have gotten much traction or had much of a sense of urgency from the larger community. Why use an inferior service, even temporarily, if a free-as-in-beer offering exists? Why spend time on promoting or contributing to a project like Linphone or Twinkle when most of your contacts aren’t on Linux — and not easy to switch to alternatives?

The Skype purchase shows why — if you’re depending on a single source for your software/service, you could be subject to this sort of disruption at any time.”

All I know for sure is that for the time being I’ve lost my opportunity to Skype, as I make it a habit to never use any Microsoft product unless I absolutely have to. I’m pretty sure I’ll never absolutely have to Skype.

Christine Hall

Christine Hall has been a journalist since 1971. In 2001, she began writing a weekly consumer computer column and started covering Linux and FOSS in 2002 after making the switch to GNU/Linux. Follow her on Twitter: @BrideOfLinux

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