Microsoft's Skype purchase proves Ballmer ain't dumb

The surprise buy puts Windows Phone back in the game, while Google's overdue 'Ice Cream Sandwich' Android OS and its new music service put pressure on Apple

Making fun of Microsoft and its hefty CEO is always fun. And snarky bloggers and tweeters had a field day after Steve Ballmer announced the $8.5 billion Skype purchase this week, with zingers like "the blue screen of voice" and "tech-support calls to Bangalore will be at a reduced rate." But if you're the CEO of Hewlett-Packard or Research in Motion, the Skype buy wasn't funny, and neither were all the jokes about Google's dessert fetish after announcements about Android 4 "Ice Cream Sandwich" and its new initiatives in the music and movie spaces.

The mobile platform war is getting hotter by the minute. The Skype megabuy shows that Microsoft has finally, finally realized it has to do something truly radical if it wants to break away from the pack of losers and establish credibility for Windows Phone. Google, meanwhile, is suddenly acting like a grown-up company, making nice with the carriers and, more important, moving to fix the biggest knock on Android: the fragmented platform.

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There are all kinds of reasons to wonder how well Microsoft will handle the difficult task of corporate and technologic integration (remember Hotmail?) with Skype, and it will be some time before Microsoft's new business unit makes a direct contribution to the bottom line. But that's not the point. With $50 billion on hand, Microsoft can afford it. Ballmer and company now own one of technology's best brands, a company with some 170 million active users a month and a name that's well on the way to becoming a verb, as in "I'll Skype you later."

And don't you think a combination of Skype and a Windows tablet or smartphone equipped with front-facing cameras will be a powerful combination? Video calling represented about 42 percent of all Skype-to-Skype minutes for the fourth quarter of 2010, according to a filing with the Securities and Exchange Commission that also outlines the company's improving financials.

Is $8.5 billion too much to pay?
A few hours after the news of the Skype buy broke, I was chatting (via Skype, of course) with my friend Jo who lives south of Santiago, Chile. "Oh my God," she said when I told her the news. "We won't be doing this much longer."

I hope she's wrong, but her reaction highlights challenge No. 1 for Microsoft: Don't mess with Skype's 663 million registered users. Microsoft has a well-deserved reputation for crummy customer service and user-unfriendly software, and people like Jo will be quick to notice a decline in service or usability.

Because Microsoft already has VoIP technology (Lync) in-house, it's possible there will be an internal fight over the direction of voice technology. That could be a disaster, although making Skype a business unit on par with the others is a smart management move that may keep the combatants at arm's length. Indeed, Microsoft needs to find a way to keep Skype's developers and engineers on board, and that's probably a degree of independence in addition to fat paychecks.

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