Вы находитесь на странице: 1из 40

Microsoft & Skype

Corporate Strategy 2011


Kristoffer Hagstedt, Emelie Hkansson, Johan Thideman

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

Key facts and figures (1:2)


Early May, 2011: rumors that Skype would enter a joint venture, or be acquired for $3-$4 billion by either Google or Facebook 10th May 2011: Microsoft acquirers Skype at a price of $8.5 billion (cash) Financial multiples (Skype 2010): Enterprise value/EBITDA: > 32x Very high relative to other companies within the IT sector!

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Agenda

Introduction

Skype

Microsoft

Analysis

Conclusion

Key facts and figures (2:2)


However, Skype is growing rapidly (from 2009 to 2010): User base: 40% Calling minutes: 150% (18 months) Revenue: 20% EBITDA (adj.): 40%

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

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.)

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

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

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

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

Founded by Niklas Zenstrm & Janus Friis

2005

$900 million accounting write down (Oct.1)

2009

2011 Skype files for a U.S. IPO (Aug.9)

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Agenda

Introduction

Skype

Microsoft

Analysis

Conclusion

Skypes business model


Freemium Free-of-charge services (e.g. Skype-to-Skype calling, video calling, chat, multi-party calling, file transfer) Premium services (e.g. subscriptions, SkypeOut, Online numbers, Voicemail, SMS) Other revenue streams:
Partnership perspective (licensing opportunities) Advertising opportunities (platform launched 2011)

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Agenda

Introduction

Skype

Microsoft

Analysis

Conclusion

How sustainable is Skypes BM? (1:3)

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.

- eBay CEO John Donahoe (2009)

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Agenda

Introduction

Skype

Microsoft

Analysis

Conclusion

How sustainable is Skypes BM? (2:3)


Pros Communication paradigm shift Hardwired networks and devices => software-based networks and flexible devices Enormous market size - communication industry (2009): $300B EBITDA $1.4T industry revenue ( compared to the total revenues of ecommerce and Search) > 650 million users => key resource that enables network effects Manages no physical network (peer-to-peer technology) => good and cost efficient scalability opportunities Strong focus on their core competence, i.e. telecommunication Pre-funded accounts => no risk of loss of receivables Strong free cash flow conversion => high margins

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

10

Agenda

Introduction

Skype

Microsoft

Analysis

Conclusion

How sustainable is Skypes BM? (3:3)


Cons
Customers rely on access to the internet provided by companies that compete with Skype Rapid technology change Low security Does not guarantee high sound quality Strong competitors and low exit barriers for customers
iChat Google Voice Apple FaceTime Facebook Chat Viber

A challenge to keep existing and attain new users

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

11

Agenda

Introduction

Skype

Microsoft

Analysis

Conclusion

Microsofts business description (1:2)

Worlds largest software company based on software


revenue

Microsofts mission is to create technology that transforms


the way people work, play and communicate.

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

12

Agenda

Introduction

Skype

Microsoft

Analysis

Conclusion

Microsofts business description (2:2)

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

13

Agenda

Introduction

Skype

Microsoft

Analysis

Conclusion

Microsofts product portfolio (1:2)

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

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

14

Agenda

Introduction

Skype

Microsoft

Analysis

Conclusion

Microsofts product portfolio (2:2)

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

SWOT analysis Microsoft (1:2)


Strengths Weaknesses

Global brand Multinational company Large customer base Rapid product development Dominant Design - Windows is the
standard OS and complementary goods are adapted to it.

Small market share within the web


search business

Low flexibility due to size Browsers No current OS in mobile phones Weak in the telecommunication market

High compatibility High liquidity (Cash and cash equivalents


of $ 52,772 millions in 2011)

Broad product portfolio

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

16

Agenda

Introduction

Skype

Microsoft

Analysis

Conclusion

SWOT analysis Microsoft (2:2)


Opportunities
Threats

Further development of their products,


e.g., Office, Xbox 360

Increased market of open source


software e.g. Linux

Windows Phone 7 Providing the customer with the full


software environment. (e.g. Operating system, email, chat, scheduling, entertainment, and voice communication)

High bargaining power of buyer Strong competition Risk of hostile takeover due to large
amount of cash

File sharing less people pays for


software

New OS in phones Android/apple


can lead to a paradigm shift in OS for computers

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

17

Agenda

Introduction

Skype

Microsoft

Analysis

Conclusion

Microsofts objective and strategy (why buying rather than developing)


Strategic partnerships and acquisitions is a part of Microsofts core strategy Strategic partnerships and acquisitions have always played an important role in Microsoft's strategy for growth and technology leadership. - Steven A. Ballmer (Microsoft CEO)

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

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

18

Agenda

Introduction

Skype

Microsoft

Analysis

Conclusion

Benefits and synergies of the acquisition (1:2)


Strategic reason In line with Microsofts growth strategy Prevent competitors such as Google and Apple from buying Product reason Skype is the perfect complement to Microsofts existing products Live video chat on Windows computers and Xbox 360 Communication when working with Microsoft Office Call-back and instant messaging features in Outlook Increase competitiveness on the Windows Phone 7 mobile platform Network reason Leverage the network effects Direct line communication with Skypes large customer base (ca.700 million) Connect Skype users with Lync, Outlook, Xbox Live and other communities

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

19

Agenda

Introduction

Skype

Microsoft

Analysis

Conclusion

Benefits and synergies of the acquisition (2:2)

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.

- Steven A. Ballmer (Microsoft CEO)

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

20

Agenda

Introduction

Skype

Microsoft

Analysis

Conclusion

Possible issues with the acquisition


High price
Skype is growing quickly Value is exponential correlated with number of user Price/user: Skype 12 $ Facebook 62 $

Hard to integrate
Ebay had a hard time integrating Skype complementary to Microsofts business strategy

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

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.)

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

22

Microsoft & Skype


Thank you for your time!

Kristoffer Hagstedt, Emelie Hkansson, Johan Thideman

Back Up Price per share


The following information was collected to calculate dollars per user.

Source: http://techcrunch.com/2011/01/21/facebook-raises-1-5-billion-at-50-billion-valuation/ 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-billion-merger-facebook-google.htm http://www.microsoft.com/presspass/press/2011/may11/05-10corpnewspr.mspx

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Back Up

Back Up - Skypes revenue streams


User services
Free Paid

Partnership perspective (licensing opportunities) Advertising opportunities (platform launched 2011)

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Back Up

Back Up Economic multiples

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

Back Up Skypes history (1:3)


Founded by Niklas Zennstrm and Janus Friis Beta software launched publicly

2003 2005
Sunday den 11 December 2011

eBay Inc. acquire Skype for $2.6 billion (Oct.14)

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Back Up

Back Up Skypes history (2:3)

2007 2009
Sunday den 11 December 2011

$900 million accounting write down (Oct.1)

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)

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Back Up

Back Up Skypes history (3:3)


Skype files for a U.S. IPO (Aug.9) Replaces CEO Josh Silverman with former Cisco senior VP, Tony Bates (Oct.4)

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)

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Back Up

Back Up Skypes historical valuation (1:2)

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Back Up

Back Up Skypes historical valuation (2:2)


The peek in the valuation of Skype between year 2009 and 2011 is a result of the new growth strategy that includes corporate subscription packages. One goal is to increase market share in the business segment, which contributes to more revenue than regular customers. Under this timeframe the monthly calling minutes increased with 150 % and new revenue streams have been developed.

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Back Up

Back Up Microsoft history (1:2)


1975 1981 1983 1985
Founded by Bill Gates and Paul Allen (April 4)

Signed a contract with IBM to provide an OS for the IBM PC (Aug.12)

Microsoft released Microsodt Word (Oct.1)

First version of Windows launched (Nov. 20)

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Back Up

Back Up - Microsofts history (2:2)


1995
Windows releases Windows 95, the replacement of MS-DOS (Aug.24)

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

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Back Up

Back Up - Microsofts business description

Microsofts mission is to create technology that transforms

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.

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Back Up

Back Up - Microsofts intentions with the acquisitions

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

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Back Up

Back Up - Reasons for acquisition (theory)


Increasing the market position Improved profit or reduced costs Synergies - financial, operating and management Increase the product line IPO Avoid competitors to buy the acquired company The managers are more interested in gaining empire than value creating for
shareholders

Receive more information about the financials of the acquired company than stated on
the market stock

Intellectual property

Sunday den 11 December 2011

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Back Up

Microsofts objective and strategy (buying rather than developing)

2010 2011
Sunday den 11 December 2011

Advertising partnership Bing (Microsoft), Yahoo and AOL

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)

D-MTEC, Corporate Strategy Skype Microsoft Case Study

Back Up

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/

Sunday den 11 December 2011

Departement/Institut/Gruppe

Back Up

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/

Sunday den 11 December 2011

Departement/Institut/Gruppe

Back Up