Microsoft recently confirmed that it will buy voice over IP company Skype Technologies for $8.5 billion, the largest acquisition in Microsoft’s history. This purchase is smart for a number of reasons. Microsoft needs to break into the smartphone market, yet it has consistently fallen behind Android, Apple, and RIM operating systems. After the company’s curious partnership with Nokia, this may be Microsoft’s last chance to become a major competitor in the market. Microsoft may also be attempting to expand on its share of the mobile search engine market with its Bing software. According to brokerage Macquarie Group, Google currently has 98% of that market.
Despite these possible opportunities, the $8.5 billion price tag seems too high. Skype currently has 663 million registered users. If the deal is looked at as a way for Microsoft to simply obtain Skype’s user base, the company is paying $12.82 per subscriber. It should also be noted that Skype only has 8.8 million paying subscribers, of 124 million active monthly users. Microsoft now has to find a way to convince the remaining 115.2 million users that their service is one worth paying for.