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12 May 2011, 10:36

Skype-ing out an open source future

by Glyn Moody

You may remember a legacy company from a few years back – used to be very big in old market segments like the desktop, but never managed to make much impact in growth areas like the web or mobile. Seems like it's found some money down the back of the sofa:

Microsoft is reported to have closed a $8.5bn (£5bn) deal for the internet phone service Skype, in a deal that has shocked analysts who think it would be a substantial overpayment for the company.

The acquisition ... would be Microsoft's biggest, ahead [of] the $6bn it paid for online advertising company aQuantive in 2007, and would bring it 660 million users worldwide while giving it a foothold in voice and video communications.

Here's what someone wrote about that aQuantive acquisition at the time:

Microsoft said it was buying aQuantive early on Friday, shocking many observers with a $6 billion purchase price, which is three times the amount it has paid for any other company and an 85 per cent premium on Aquantive's closing stock price on Thursday.

Now, be honest: do you remember that aQuantive deal? Are you aware of any benefit that Microsoft has managed to extract from a purchase with that “shocking” purchase price? No, me neither. Now compare that acquisition with its current move, which has also “shocked” people for its “substantial overpayment”. Sounds like déj  vu all over again.

But leaving all this shock aside, what will the impact of an undoubtedly important move be for open source?

Whatever else it might mean, one consequence of the deal is that Microsoft now has less money in the bank, which will have knock-on consequences in all the markets it is active in. Given that it started out with $50 billion, and now has “only” $42 billion, you might think that effect will be minimal. But according to this interesting analysis, most of Microsoft's money is held outside the US, which means that it's actually quite constrained in the things it can do with it.

Just as importantly, integrating Skype into its existing businesses and products is likely to be a non-trivial problem; it will surely eat up a lot of management time, which will thus become scarcer for other projects as a result. There are persistent rumours that Skype runs its backend systems on GNU/Linux, and it certainly was using PostgreSQL if either is still the case, that could certainly make bringing them in-house a lot of fun for Microsoft engineers. That's likely to be good news for free software, since top managers will inevitably be worried about more immediate concerns than trying to stop its unstoppable rise.

Against that, the acquisition does, obviously, have some benefits for the company. It brings Microsoft a product that is the market leader with "170 million connected users" – I presume “connected” is marketing-speak for “active”, which means the odd half-billion accounts must be inactive. As Internet speeds increase around the world, voice chats and video conferencing are likely to become increasingly common. Microsoft will doubtless be integrating Skype into a wide range of its current home and business applications to take advantage of those trends.

But frankly, that's all pretty dull stuff. Add in the protean Kinect, however, and things begin to hot up, as these videos show. I can see how Skype's code might really be useful once you can combine it with Kinect to conduct video chats in your living room using your TV, or global group meetings at work. It is, however, striking that most of Microsoft's more interesting work seems to revolve around Kinect these days: it's almost as if it's the only innovative idea it's got left...

Another important future market for Skype is mobile phones. This is an area of contention currently, since mobile operators are reluctant to allow Skype to place calls across the mobile Internet for free, even though this is clearly inevitable in the long term (after all, a bit is a bit is a bit, so blocking voice over mobile has no justification from a technical viewpoint).

Next: Skype vs VOIP alternatives

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