Microsoft-Skype: Can Bates stand working for Ballmer?


So it’s official: Skype did not end up in Google or Facebook’s embrace; it now belongs to Microsoft, as CEO Tony Bates wrote on its blog.

I was hoping to see Skype go through with its IPO later this year as a master of its own destiny. A great company with a time-tested product, now we’re left wondering how Skype would’ve fared independently.

There’s a lot of techno-analyses on this $8.5 billion deal — the largest acquisition made by Microsoft. Will Live Messenger survive? Will Skype end up in Lync? Will Microsoft continue to support Skype on non-MS platforms (e.g. Mac, Linux, iOS, Android, etc.)? With this acquisition there will be many overlapping products, but Microsoft scores with owning Skype intellectual properties, especially in peer-to-peer communications — something quite useful for Microsoft’s cloud initiatives.

Some have questioned whether Skype itself will survive under the Redmond Giant, taking a page from history about the former glory days of Hotmail. Yahoo Mail and Gmail have pushed Hotmail into the preferred email service to receive spam and unwanted newsletters. Let’s hope Skype doesn’t end up in a similar fate as Hotmail.

My real question, however, is to CEO Tony Bates: What happened? Was the IPO pressure too great and the investors insisted on selling? They had the most to gain from the $8.5 billion sale in cold, hard Microsoft cash. According to GigaOm:

  • Using the $8.5 billion price as the likely sale price, eBay gets $2.55 billion for its 30 percent stake in Skype. So in the end, eBay did make money on the Skype deal.
  • Niklas Zennström and Janus Friis, the co-founders with their 14-percent stake, take home about $1.19 billion. Damn, these guys know how to double dip!
  • Silver Lake, Andreessen Horowitz and the Canada Pension Plan Investment Board (CPPIB) own 56 percent of the company and that stake is worth $4.76 billion.
  • Andreessen Horowitz had 3 percent of the deal and made $205 million profit on their $50 million initial investment.

I would think that Bates would’ve wanted to stay independent instead of getting sold. After all, he was formerly with Cisco and headed the enterprise groups, responsible for 80 percent of Cisco’s business and profits. Why would he leave the Cisco bureaucracy in hopes to enter another gigantic bureaucratic organization? He was thriving at the helm of Skype. Instead of reporting to John Chambers, now he’ll report to Steve Ballmer. Good luck with that.

To Microsoft: I don’t want to see a BSoD when I’m on Skype video with somebody, okay? Thanks.

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