Microsoft Skype Deal

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Microsoft¶s deal to buy Skype for

$8.5 billion is the largest acquisition

in the history of the company.

The sellers include eBay Inc. and private

equity firms Silver Lake and Andreessen

Horowitz, CPP Investment Board, JoltidLimited in partnership with Europlay Capital

Advisors.



MOTIVE OF ACQUISITION :MICROSOFT

Despite being a front-runner in the computer software market, Microsoft had been losing market

share to Google in the online search space.

Microsoft used to rule with Hotmail but lost the

crown to Yahoo and Gmail.It¶s been losing the browser battle to Firefox and

Chrome.

Losing theWindows Phone battle to Apple andGoogle.

Therefore, the reasons for Microsoft buying the

company are completely strategic.



MOTIVE OF ACQUISITION:

SKYPE

Skype recorded $859.8 million in revenue and a net loss of

$7 million in 2010, according to a recent filing. The previous

year, the loss exceeded $300 million.

Skype had filed for an IPO, was going to do about a billiondollars in revenues, and was on its way to becoming

profitable.So why sell? Silver Lake and eBay were both gettingimpatient and wanted to lock in their profits. Some sourcesalso believe Skypes revenues had stalled.



The synergy benefits in the case:The acquisition will increase the accessibility of real-time video and

voice communications, bringing benefits to both consumers andenterprise users and generating significant new business and revenueopportunities.The combination will extend Skypes world-class brandand the reach of its networked platform, while enhancing Microsoftsexisting portfolio of real-time communications products and services.

As saidTony BatesMicrosoft and Skype share the vision of bringingsoftware innovation and products to our customers,. Together, wewill be able to accelerate Skype's plans to extend our global communityand introduce new ways for everyone to communicate and collaborate

Skype will support Microsoft devices like Xbox and Kinect, WindowsPhone and a wide array of Windows devices, and Microsoft will connectSkype users with Lync, Outlook, Xbox Live and other communities.

Microsoft will continue to invest in and support Skype clients on non-Microsoft latforms.



Skype gives Microsoft a boost in the enterprise collaboration

market, thanks to Skype¶s voice, video and sharing capabilities,especially when competing with Cisco and Google.

It gives Microsoft a working relationship with carriers, many

of them looking to partner with Skype as they start to transition

to LTE-based networks.

It would give them a must-have application/service that can

help with the adoption of the future versions of Windows

Mobile operating system.

However, the biggest reason for Microsoft to buy Skype is

Windows Phone 7 (Mobile OS) and Nokia. The software giant

needs a competitive offering to Google Voice and Apple¶s

emerging communication platform.



FINANCING THE MERGER:

So Who Made What?

Using the $8.5 billion price as the likely sale price, eBaygets $2.55 billion for its 30-percent stake in Skype.

Niklas Zennström and Janus Friis, the co-founders, withtheir 14-percent stake, take home about $1.19 billion.

Silver Lake, Andreessen Horowitz and the Canada PensionPlan Investment Board (CPPIB) own 56 percent of thecompany, and that stake is worth $4.76 billion.

Andreessen Horowitz had 30 percent of the deal and made$20 million rofit on their $ 0 million initial investment.



VALUATION OF THE DEAL:Skype is a private business and we know little about the insides of the financial

statements. It is widely reported, though, that Skype had operating losses of $7 million

on revenues of $ 860 million in 2010.

MICROSOFT IN NUMBERS

1975 Microsoft founded

$217.82billion market cap worth$68.62billion turn over in 2010

$50.09billion pre-tax profit in 2010

-10.75 per cent share price drop over in 2010

350million Windows 7 licenses sold to date

SKYPE IN NUMBERS

2003 Skype founded

663 million registered users

$860m revenues last year and an operating profit of $264million

$7million lost last year overall

$686million long-term debt207billion minutes of voice and video conversations in 2010



BIBLIOGRAPHY:

FOLLOWING ARE THE VARIOUS SOURCES FROM WHERE I HAVE

COLLECTED THE DATA:

NEWSPAPER S ±

The Economic Times

The Times Of India

International Business Times

Following Websites ±

http://www.financetwitter.com/2011/05/microsoft-skype-deal-seven-reasons-the-sucker-did-it.html

http://www.microsoft.com/presspass/default.mspx

http://www.dailymail.co.uk/news/article-1385472/Microsoft-buy-internet-phone-service-Skype-8-5bn.ht

http://www.ibtimes.com/articles/143750/20110511/skypes-owners-set-to-makebillion-source.htm

http://www.itpro.in/625843/microsoft-closes-skype-deal-for-8-5-billion

As George Bernard Shaw famously said, ³We are made wise not by the

recollection of our past, but by the responsibility for our future´

THANK YOU

Microsoft Skype Deal

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