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Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Agenda
1. Introduction Purpose and key questions Key facts and figures of the acquisition Conclusion 2. Skype History Business Model Sustainability of Skypes Business Model 3. Microsoft History Business Model Product portfolio 4. Analysis of the rational behind the acquisition SWOT-analysis of Microsoft (pre-acquisition) Microsofts objective and strategy (buying rather than developing) Benefits and synergies Possible Issues with the Acquisition 5. Conclusion Why Microsoft acquired Skype
Sunday den 11 December 2011 D-MTEC, Corporate Strategy Skype Microsoft Case Study 1
Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Purpose
The purpose of this study is to analyze Microsofts reasoning behind the acquisition of Skype, as well as to come up with a recommendation regarding how Microsoft best benefits from the acquisition.
Understanding Skypes and Microsofts business models and their product portfolio respectively. Why buy instead of developing similar technology? How can Microsoft benefit and which synergies can be obtained from the acquisition?
Sunday den 11 December 2011 D-MTEC, Corporate Strategy Skype Microsoft Case Study 2
Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Conclusion
Microsoft bought a complementary company, hence Skype mirrors many of Microsofts existing products and in our opinion can Microsoft leverage Skype in several ways. Pros:
Acquisitions is in line with the companys growth strategy Prevent competitors from acquiring Skype Skypes technology is complementary to MS products and can be integrated in all of the companys business segments The company got access to Skypes large customer base
Cons:
Concerns about the high acquisition price Problems to integrate (retaining employees, organizational etc.)
Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Skype is communications software whose purpose is to break down barriers to communication. With an Internetconnected device, families, friends and colleagues can get together for free with messaging, voice and video. At low cost, they can also call landlines or mobiles virtually anywhere in the world. - Skype press, 2011
Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Skypes history
eBay Inc. acquire Skype for $2.6 billion (Oct.14) 2003
eBay sells a two-thirds stake to an investment group led by Microsoft Corp. agrees to Silver Lake for roughly $2 billion buy Skype for $8.5 billion valued at $2.75 billion (Nov.19) (May 10) 2007 2010
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2009
Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Communications is no longer just about voice; its now multimodal: mood messages, chat, voice calling, multi-party calling, video calling and online screen sharing. Where and how we communicate is expanding: laptop, mobile phone, flat panel TVs any connected computing device with the addition of software becomes a communication device.
Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
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Introduction
Skype
Microsoft
Analysis
Conclusion
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Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
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Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
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Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Microsoft have a broad range of products Main products (by business segments): Home: Windows Live Hotmail, xBox, Kinect, Windows
Live Messenger Office: Lync, Exchange Server Home & Work: Windows Anywhere: Windows Phone
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Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Source: http://infographipedia.com/infographic-skype-from-conception-to-acquisition-rasdroid.html
Sunday den 11 December 2011 D-MTEC, Corporate Strategy Skype Microsoft Case Study 15
Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Global brand Multinational company Large customer base Rapid product development Dominant Design - Windows is the
standard OS and complementary goods are adapted to it.
Low flexibility due to size Browsers No current OS in mobile phones Weak in the telecommunication market
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Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
High bargaining power of buyer Strong competition Risk of hostile takeover due to large
amount of cash
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Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Time is a critical factor in this business it takes much longer time to develop a well functioning product themselves than to acquire. By buying Microsoft gets Skypes existing customer base leverage the network effect Large pile of cash is being put to work
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Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
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Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Skype is a perfect fit with Microsoft's core vision to unleash our customers' productivity and creativity by making it easier for them to communicate and work together. With the acquisition of Skype and requisite regulatory approval, we'll connect hundreds of millions of people and provide them exciting new ways to communicate and create on PCs, phones, the Xbox, and through applications like Office and Lync.
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Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Hard to integrate
Ebay had a hard time integrating Skype complementary to Microsofts business strategy
21
Agenda
Introduction
Skype
Microsoft
Analysis
Conclusion
Conclusion
Microsoft bought a complementary company, hence Skype mirrors many of Microsofts existing products and in our opinion can Microsoft leverage Skype in several ways. Pros:
Acquisitions is in line with the companys growth strategy Prevent competitors from acquiring Skype Skypes technology is complementary to MS products and can be integrated in all of the companys business segments The company got access to Skypes large customer base
Cons:
Concerns about the high acquisition price Problems to integrate (retaining employees, organizational etc.)
22
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Skype 2011
The average value of Enterprice value/EBITDA for Computer Software (Svcs) is 10.8.
Sources: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/vebitda.html (compared) http://blogs.vccircle.com/500/healthy-airhotel-travel-trends-to-benefit-makemytrip/ http://tradingfloor.com/blogs/equity-daily-theme/microsofts-acquisition-of-skype--a-square-peg-in-a-round-hole-1220314633 Sunday den 11 December 2011 D-MTEC, Corporate Strategy Skype Microsoft Case Study Back Up
2003 2005
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2007 2009
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eBay announces a spin off of Skype through an IPO (April 14) eBay announced it will sell 65 % stake in Skype (Sept.1) eBay sells a two-thirds stake to an investment group led by Silver Lake for roughly $2 billion valued at $2.75 billion (Nov. 19)
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2010 2011
Sunday den 11 December 2011
Skype announces a launch of a advertising platform (March 7) Microsoft Corp. agrees to buy Skype for $8.5 billion (May 10) Microsofts acquisition of Skype got EU approval (Oct. 7)
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Microsoft XP released, the replacement of Windows 95(Oct.25) 2001 Microsoft launches the Xbox (Nov.15) Windows Mobile, the OS for smartphones and PDAs was announced 2003 (Jun.23) Gates leaves Microsoft Apple comes close to passing Microsoft as the worlds most valuable technology company in the US
2005
2010
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the way people work, play and communicate. Revenue streams: Develop, license, and support a wide range of software products and services Designing and selling hardware Delivering relevant online advertising to a global customer audience. Selling individual products and services, we offer suites of products and services.
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Microsoft will according to CEO Steve Ballmer: Integrate Skype with their product portfolio Optimize Skype for the TV, with xBox and Kinect as
well for Windows Phone and Windows PC Connecting the users of Skype with the user of their Outlook products Use the customer base of Skype to connect to Lync
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Receive more information about the financials of the acquired company than stated on
the market stock
Intellectual property
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2010 2011
Sunday den 11 December 2011
Partnership with Nokia Windows Phones (Feb) Partnership with Facebook personalized search results based on friends opinions (may) Intention to acquire Skype new ways of communicate (may)
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References (1:2)
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/vebitda.html (compared) http://blogs.vccircle.com/500/healthy-airhotel-travel-trends-to-benefit-makemytrip/ http://www.tradingfloor.com/blogs/equity-daily-theme/microsofts-acquisition-of-skype--a-square-peg-in-a-roundhole-1220314633 See: http://www.tradingfloor.com/blogs/equity-daily-theme/microsofts-acquisition-of-skype--a-square-peg-in-a-roundhole-1220314633 http://blogs.vccircle.com/500/healthy-airhotel-travel-trends-to-benefit-makemytrip/ http://information.anu.edu.au/daisy/infoservices/945.html http://www.slideshare.net/bonics/skype-anlaysis http://www.microsoft.com/investor/reports/ar11/index.html http://www.businessweek.com/news/2011-03-04/microsoft-said-to-plan-windows-release-for-tablets-in-2012.html http://www.softwaretop100.org/global-software-top-100-edition-2011-the-highlights http://www.microsoft.com/investor/reports/ar11/index.html http://www.microsoft.com/investor/reports/ar11/shareholder_letter/index.html http://www.reuters.com/article/2011/11/08/us-microsoft-aol-yahoo-idUSTRE7A77HP20111108 http://www.microsoft.com/investor/reports/ar11/shareholder_letter/index.html http://techland.time.com/2011/05/10/a-brief-history-of-skype/ http://www.microsoft.com/investor/reports/ar11/shareholder_letter/index.html http://techcrunch.com/2011/01/21/facebook-raises-1-5-billion-at-50-billion-valuation/
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References (2:2)
https://www.facebook.com/press/info.php?statistics http://www.ibtimes.com/articles/143246/20110510/skype-key-facts-about-what-microsoft-acquire-buy-8-5-billionmerger-facebook-google.htm http://www.microsoft.com/presspass/press/2011/may11/05-10corpnewspr.mspx http://www.microsoft.com/investor/reports/ar11/financial_review/general.html http://www.pcmag.com/article2/0,2817,2393804,00.asp http://news.brothersoft.com/forbes-skype-changes-its-growth-strategy-34.html http://www.microsoft.com/presspass/press/2011/may11/05-10corpnewspr.mspx http://webtrends.about.com/od/profi3/p/Microsoft-bio.htm http://exclusiveeconomy.com/2011/03/microsoft-history-timeline/
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