Microsoft chief executive Steve Ballmer and Skype boss Tony Bates gave a press conference at 8am local time in San Francisco to discuss their $8.5bn deal, announced today.
After live-blogging the event, here are my initial conclusions:
The pair emphasised the commercial opportunities ahead for Microsoft and Skype, including more video advertising within the communications application – and stressed that even with 170m active users, the service is still growing fast. Skype is now profitable, they said, after reporting losses of $7m last year. Ballmer also reassured users of Apple Macs and Google Android smartphones that development and support of Skype would continue on non-Microsoft platforms, although clearly the focus is going to be on getting Skype onto devices such as Xbox Kinect.
But there remain many unanswered questions: will Microsoft take advantage of Skype’s huge customer base to give Bing a lift in the search wars against Google? There was little detail on how it will be integrated into Windows Phone. And there were tantalising hints that Skype users’ tight-knit groups of friends on the service could give Microsoft a leg-up in its social strategy.
Read on for the full live-blog of the Microsoft-Skype conference call as it happened, in reverse chronological order.
16.48: And that short Q&A concludes the Skype conference call. Stay tuned to FT.com for further analysis on Microsoft’s latest mega-deal in the coming hours.
16.46: Tony Bates admits Skype’s enterprise strategy is still in its “early stages”. He suggests this is an area where Microsoft’s other products will be valuable. Ballmer says that Microsoft products such as Lync, its corporate messaging tool, can help Skype tie its enterprise users to their customers and partners outside the “four walls” of the business.
16.44: Question about Skype’s occasionally strained relationship with carriers. Such partnerships will be “fundamental to getting Windows Phone to the next level” in the market, says Ballmer. “The key to business acceleration is innovation in new scenarios – our opportunity to do that has been enhanced.”
Bates says that carriers tell Skype they want something that can differentiate. “We have had some strong partnerships with mobile operators and we think that can continue.” Microsoft has already heard supporting noises from operator partners, Ballmer adds.
16.42: Question about Skype on Android, iOS and other non-Microsoft platforms. How can Microsoft reassure them this multi-platform approach will continue?
Steve Ballmer: “I said it and I mean it – we will continue to support non-Microsoft platforms because it is fundamental to communication.” He also references Office for Mac. “We have a track record of understanding the need to support our customers as they travel in various places…. We love Windows and Windows Phone and Xbox…. but fundamental to the value proposition of communications is being able to reach everybody… That will be one of our competitive advantages.”
16.41: PC, mobile and the living room are areas that Skype could make lives easier, says Bates. We already are on 50m TVs, he says. We need to broaden that and connect to other devices.
16.39: Steve Ballmer talks up the opportunity for the Xbox Kinect integration. “A great scenario I still think is room-size, someone not present you want them to fully participate in a family event.”
On the business side, he adds: “We want to stitch together the world – we have big customer bases we can connect.”
16.38: Tony Bates dodges a question about whether other people were involved in courting Skype… Google and Facebook had been rumoured acquirers before Microsoft’s deal broke.
16.37: A question about developing the ad business. “We think advertising is a very powerful monetisation stream for us, if you think about the size of our userbase,” says Tony Bates. “We want to approach the marketplace from a rich media perspective.” Animated ads, for instance. This would have been an interesting area for discussion even without an acquisition, adds Ballmer.
16.35: Steve Ballmer: “In this particular case we were in a set of partnership discussions and our team -including me – all got excited about it. We said, we think it would be better if we owned this company. We did make an unsolicited offer.”
16.35: Users, engagement, operating income and innovation will be among the metrics for assessing the success of the acquisition, Ballmer says. “Fairly classic in the business sense.”
16.34 Steve Ballmer: Microsoft and skype are targeting “billions of consumers and empower them to communicate in new and interesting ways. It’s core to our mission.” And now we are into Q&A.
16.33: Back to Steve Ballmer: “We are a very ambitious company. we are irrepressible in moving forward and trying new things. This Skype acquistion is entirely consistent with our ambitious, irrepresible, forward-looking nature.”
16.32: Peter Klein: Total consideration of $8.5bn, all in cash – using overseas cash to make this transaction. We expect that this will be accretive immediately, excluding non amortisation charges. Expect regulatory approvals during the remainder of this calendar year.
16.31: Peter Klein, Microsoft CFO, is now going to talk numbers. Ebitda growing 40 per cent, margins up – “a strong growing business” and new revenue streams that “we are just scratching the surface on”.
16.30: Tony Bates: “Skype is that inner circle of friends – 8 to 10 folks they talk to every day. How that intersects with social is really exciting for us.”
“We believe that this is a platform and set of services that can reach everyone on the planet.”
16.28: Video is in our DNA , says Bates – 40 per cent of calling. “Video ads is one of the biggest opportunities we see going forward.” Just at the beginning of its growth in US, he says. Estimates 45% growth as compound annual growth rate in next few years.
16.26: Three big opportunities for Skype: Core communications service. On top of that premium realtime and non-realtime services. Also advertising. Tony Bates: “We have a very fundamentally sound business. We wouldn’t be here if Steve didn’t believe that.” Skype is profitable and growing fast, he says.
16.25: Tony Bates: “The core of what Skype is today is being able to create a very very engaged userbase. We are in a very special place in the industry. We are not only a verb… we are part of a very exclusive club.”
16.24: Skype CEO Tony Bates is now taking to the stage. “This is a big day for Skype, this is a big day for our users first and foremost – but most importantly for all our Skype employees. We are incredibly excited about the opportunity.”
16.22: Steve Ballmer: “We want to continue to build and engage that userbase as Skype is doing today. Tony will join the leadership team, reporting directly to me and running the Microsfot Skype division.”
Steve Ballmer: “Products and services that Skype uses know and love today will simply grow and be enhanced. Part of that includes building and supporting on non-Microsoft platforms. We are committed to optimising Skype for the Tv, with Xbox Kinect, the phone and the PC. At the same time we want to extend the reach of Skype by connecting users with Outlook products, our Lync enterprise communcations products, Xbox Live and other opportunities like Messenger and Hotmail. Our opportunity is to build and grow the Skype brand.”
Steve Ballmer: “We are excited about the opportunities we see in the consumer and commercial area.” Mobile operators will also be a focus, he says.
Discussions started as an advertising partnership, says Ballmer, after working together for many years.
“We made an unsolicited offer to Silver Lake [Skype’s former private equity owners], we finalised price in mid-April and signed the deal last night,” he says.
Ballmer has been talking to Skype employees in Europe early this morning
Steve Ballmer: “Microsoft and Skype together will decide this future and what it really looks like.
Anytime people talk about communications they talk about Skype. The Skype brand has become a verb, nearly synoymous with video and voice communications.”
Stats:
170m connected Skype users, growth of 40 per cent year over year – 600,000 new registrations every day. Skype users used over 207bn calling minutes in 2010. Overall revenue has grown 20 per cent year over year.
“In case it’s not clear, I’m excited about the Skype business,” says Ballmer.
Steve Ballmer: “Communications is perhaps the most fundamental way in which technology can be transformative. We will move beyond email and text to rich experiences in the future. Talking to friends and colleagues around the world will be as seamless as talking to them across the boardroom or kitchen table.”
College lectures and office meetings will be improved by technology, he says.
Steve Ballmer: “Today is a big day for Microsoft and Skype as well as consumers and businesses around the world. By bringing togehter the best of Microsoft and the best of Skype we will empower people with new technologies that will bring them closer together.”
This is at the core of “who we are at Microsoft”, Ballmer says – Xbox, Bing.
The conference is now beginning.
“We heard there wasn’t much going on today so we wanted to make sure you had some news to cover,” says Microsoft’s PR chief. A “short Q&A” will follow the prepared remarks from Steve Ballmer and Tony Bates.
