For Microsoft, Skype opens market in telecom

Microsoft has peered into the future and placed a bet that people the world over want to stay in touch with someone anytime and anywhere —preferably at no cost.

In agreeing to pay $8.5 billion to buy Skype, the pioneer in Internet phone calls, Microsoft is embracing a technology that is transforming the way people communicate at home and at work. And by stitching Skype technology into Microsoft products, used by hundreds of millions of people, the software giant could hasten the mainstream adoption of video communications, especially in businesses.

Microsoft, although rich and powerful, lags in new fields like smartphone software. Skype could help it better compete with the new giants of technology, like Google and Apple.

“Skype has been a forerunner, and this deal is Microsoft trying to become relevant in this new age of Internet communications,” said Berge Ayvazian, a telecommunications consultant. “It could really change things for Microsoft and accelerate the spread of this new technology.”

The future of communications, industry analysts and executives say, will be animated by Internet technology and rests increasingly on video calls, as well as voice and text messages. Skype started on personal computers less than a decade ago but is now beginning to make its way onto smartphones. As it heads for living rooms with applications like at-home videoconferencing on digital televisions it could change the way people make even the most routine calls.

This next generation of communications is both a threat and an opportunity to telecommunications and technology companies — a focus of energy, investment and anxiety for corporations including AT&T, Verizon, Apple, Google and Facebook.

Microsoft is betting that Skype can help change its fortunes. Skype is a leader in Internet voice and video communications, with 170 million users each month connected for more than 100 minutes on an average. In the past year or two, video use has surged, now accounting for 40 per cent of Skype’s traffic.

That large and active community of users represents a major asset, said Steven A Ballmer, Microsoft’s chief executive.

“It’s an amazing customer footprint,” Ballmer said in an interview. “And Skype is a verb, as they say.”

©2011 The New York
Times News Service