John Paczkowski

Recent Posts by John Paczkowski

Ballmer On Skyprosoft: Together We'll Define The Future

With its shares slipping on news of its $8.5 billion acquisition of Internet phone company Skype, Microsoft held a press conference Tuesday morning to explain the deal, which is valued at about 10 times Skype’s 2010 revenue.

Below, notes and slides (click to enlarge) from the call:

  • After quickly introducing Skype CEO Tony Bates, Microsoft CEO Steve Ballmer offers a quick explanation of the deal and the opportunities it presents. “Skype is part of Microsoft’s plan to empower people with new technologies that will bring them closer together.” Ballmer says this dovetails nicely with Microsoft products like X-Box and Outlook.
  • “Communications is perhaps the most fundamental area in which technology can be transformative,” Ballmer says. “Together, Microsoft and Skype will define this future … In case it’s not clear, I’m excited about the Skype business.”
  • Ballmer continues, stressing the strength of the Skype brand. It’s “nearly synonymous with Internet phone calls” he says, adding its known well for video chatting as well. Skype is seeing 40 percent growth in users Y-O-Y. In 2010 it had some 207 billion calling minutes. It had 20 percent revenue growth year over year, as well.
  • Now a quick timeline of the deal: Microsoft made an unsolicited offer to Silverlake earlier this year. The deal was finalized last month and signed last night.
  • Some reassurance for folks worried that Microsoft won’t continue to Skype on non-Microsoft platforms. Ballmer says it will and that the company’s intent is to further extend it. First place it’s headed: Xbox
  • How will Microsoft handle telecom companies who view Skype as a challenge to their business? Obviously Microsoft wants to keep carriers happy so they’ll sell its Windows Phone 7 handsets, so this “a particular area of focus” for the company.
  • Skype CEO Tony Bates takes the stage, says this is a “big day” for Skype users, etc. “This deal allows us to extend Skype from hundreds of millions to billions of people. … We think we … can reach everyone on the planet.”
  • Sales pitch continues: Bates says Skype’s social features will be particularly powerful once they’re integrated into Microsoft products like Outlook, etc.
  • Interesting: Bates says estimated 45 percent growth in video-based ads.
  • Microsoft CFO Peter Klein takes the stage to discuss financials, says Skype is a strong and growing business. Revenue up 20 percent from last year. EBITDA up 40 percent.
  • Ballmer returns to close out the presentation.”We’re a super ambitious company,” he says. “We’re irrepressible in moving forward and pursuing new things in hot new markets. … Sometimes we build things ourselves as we’ve done with Bing and Kinect…. other times, we’ll make an acquisition like we’re announcing today. …Microsoft and Skype will bring together hundreds of millions, even billions, of consumers and empower them to connect in new and interesting ways. This is core to our mission, and it’s core to our technology direction.”
  • Moving on to the Q&A. Throw away question asking for color on the deal. Signed last night, yaddayadda. Then a question about revenue generation. Bates says advertising will be a powerful monetization stream for Skype.
  • Were there any other bidders? They dodge the question saying Skype was “very focused” on its IPO … this was an unsolicited offer. Meanwhile, I’m hearing that Microsoft was the ONLY bidder, or at least the only serious one.
  • Question about continued support for Skype on non-Microsoft platforms. Ballmer says again that it will continue.
    “I said it and I mean it,” he explains. “Microsoft will continue to support non-Microsoft platforms because it is fundamental to the value proposition of communications. We are one of the few companies that has a track record of doing this. Look at what we’ve done with Office for the Mac … Fundamental to the value proposition of communications is being able to reach everybody, whether they happen to be on your devices or not.”

    Bates chimes in saying commitment to supporting other platforms was fundamental to the deal.

  • A final question: Can Skype compete with big enterprise teleconferencing companies like Cisco? Answer seems to be yes. “We’re moving forward in this area.”
  • And that’s it. Call’s over.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik