Posted on 05/13/2011 9:12:02 AM PDT by TheConservativeCitizen
Just when you thought gentlemanly business competition was coming back to America….
Back in the ‘90’s, when all the bank mergers were happening and there was a massive consolidation of the defense industry going on, The Onion featured a headline that read something to the effect that Business has been Consolidated to Six Corporations. That’s about what it felt like at the time. Never mind anti-trust or the laws on vertical integration to prevent monopolies, competition was going out of style (and under a Democratic administration, too. Imagine that).
That headline popped into my consciousness this week when I heard that Microsoft was buying Skype. Well, seriously considering it anyway. That thought was followed by, Oh, great, another decent product for them to wreck. (the subject of the wasted work hours all office workers endure while trying to figure out the latest version of Office is for another blog) I realize that Skype is technically a European company, but it’s been owned by American corporations and venture capitalists for a number of years now, so we’ve more or less adopted it. And now, with Microsoft as the buyer, it really will be American (and a reason for Microsoft to jack up the price of Office).
As journalism is but a rough draft of history, 24 hours after the story made headlines and scrolls everywhere, it all started to take shape. Yesterday’s digests brought a couple articles to my inbox that shed a little light on why Microsoft would be the high bidder. (Find them here and here. Okay, I know one is the New York Times, but as a news story it says a lot.)
It seems that Skype, in its many versions and manifestations, has never really been profitable. It’s made a lot of money, but still loses some each year, and the investors are getting impatient. Without seeing the books, it’s impossible to know if this is due to business practices or some budgeting issue (say, uncontrolled expenses). EBay is the current owner and Skype really does not integrate with that product well (you have to wonder who ever thought it would). Facebook was courted as a buyer for a time, but that’s not really a good fit, either. Also, the founders of Skype have gone out of their way in the last few years to not only maintain control, but to protect trade secrets – even suing a potential buyer when Skype was being sold by eBay last year. In the US, no less.
Well, ultimately, this is actually the latest move in a gigantic communications business square off between Microsoft and Google (which makes the whole thing make a lot more sense). Google developed its own video calling that is considered to be Skype’s main competition as web-based conferencing is pretty much dominated by other players. Google has also developed a suite of office production tools that includes a fairly simple word processor, spreadsheet, presentation slide show and more – collectively known as Google Docs – that is available for free along with storage space. It certainly does not replace Microsoft Office, but for those who don’t need all the bells and whistles of Office 2010, it’s adequate – and a heck of a lot cheaper than site licenses for the whole Office Suite. Not only that, Google Docs is available through the inter-net, so it does not need to be loaded on a PC to be used. Any computer anywhere with a browser will get a user to it. Microsoft is reverting to its old business model of acquiring its products, and this is definitely an addition. So, the two have the same basic products now. Add the search engines and Viola! instant giant communications competitors.
But, wait, Microsoft doesn’t like competition (minor problem). That might be true, but until they carry all the features the competition does, there is no way for them to dominate. How they are going to be able to compete with free for the non-corporate consumer is another story. This should be interesting to watch. Vertical integration as a business practice has been busted in times past in the US. We’ll see how this one is handled.
Bye Bye Skype.
We loved ya
When banks began consolidating and merging in the late eigthies I told everyone that it was a bad error, that there would be a big blow out because of the lack of competition and the uniformity of management decisions.
And look where we are now......
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