Consider it the curse of being a hulk. Perhaps the folks up at Redmond really need some slap-therapy. But whatever the case, their purchase of Skype this week for $8,500,000,000 (8.5 Billion) is not a good thing. For all sorts of reasons, Microsoft has a tendency to purchase thriving companies and make them fail.
Skype has been around for years, gaining popularity all over the globe for it’s simple and great service- allowing video, voice, and chat communication over the internet. Their user base is over 670 million, making them a larger community than Facebook. Skype was founded in 2003 by Ahti Heinla, Priit Kasesalu and Jaan Tallinn. Named from “Sky peer-to-peer”, These Estonian developers quickly grew the company, utilizing VOIP over a peer-to-peer system rather than a client–server system, and makes use of background processing on computers running Skype software.
Though sold in part to eBay in years past, Skype retained a great deal of autonomy, and continued growth around the globe. With this latest (and biggest ever) purchase by Microsoft, Skype risks falling into a bloated machine that hasn’t had the best of luck fostering health in its many divisions.
Take the Kin, Microsoft’s attempt to launch a ‘hip’ and new phone platform for a young generation. Development costs of a billion dollars brought about a poorly received device, one that absolutely tanked in sales. Within a few months, they pulled the plug on the project, wrapping up what must have been a painful, ugly memory for many involved.
The question is, can Microsoft still innovate?
The core concern revolves around the company’s ability to integrate Skype into both its managerial structure and technological DNA, and, in turn, develop an innovative, profitable product, one that would both account for the sizable expenditure and reinvigorate the Microsoft brand. But for a company plagued by a reputation as a graveyard for once-hot properties, it may be an uphill climb.
According to Trip Chowdhry, a senior analyst at Global Equities Research, Wall Street’s biggest worry “is that internal politics are killing innovation at Microsoft.” Chowdhry explained there are “politics at almost every level” of the company. As a result, he posited, “Great ideas are getting hammered.”
According to Chowdhry’s analysis, the notion that Microsoft can no longer recruit top-tier talent persists. Until 2000, employees received stock options, and the company had a reputation for attracting tech’s biggest and best minds. When this practice discontinued, Chowdhry said the quality of the talent markedly deteriorated: Many of the industry’s brightest left for Silicon Valley, where stock options are in full swing.
“Stock options,” he postulated, “alleviate a company from internal political dynamics.” Employees no longer need to curry favor with superiors in the hopes of a receiving a bonus, so they can think “more in terms of the customer and the company.”
These days, according to Chowdhry, Microsoft is seen “as a place to retire — a ’90s company in the framework of 2010.”
To their credit, Microsoft has had some hits in the past few years, namely their Xbox system and the Kinect device that shows real promise in controller-less input by users. But in a company of their size and wealth, greatness is expected and demanded. Microsoft seems to happen upon it by chance and not by planning. And that shows systemic weaknesses that echo the ugly era of Detroit’s Big Three, a story we know all too well.
So, time will tell if this latest enormous takeover has merit. But for the time being, many will remain highly skeptical.