Cavorting in the Cloud: A CounterPath Perspective on Microsoft's Acquisition of Skype

As most of us read this week, Microsoft announced an $8.5 billion dollar bid for Skype.  Rumors had started swirling last week that Facebook and Google had their eyes on Skype, then over the weekend reports surfaced that Microsoft had entered the race. 

Now you may ask, “Why now?” The word on the street was that the main investors in Skype were getting nervous about the Initial Public Offering (IPO) and decided to float the idea of a buyout. From a deal point of view, Silver Lake Partners (who own Avaya with TPG Inc.) took approximately $4.76B, eBay received approximately $2.55B, the original co-founders of Skype took approximately $1.19B and Andreessen Horowitz obtained approximately $205M.

With this significant deal underway, some people may be wondering what this means for CounterPath. From my perspective, Microsoft’s acquisition of Skype is great for not only CounterPath, but the entire ecosystem that enables VoIP.  The reasons are:

1. The transaction raises the stakes for operators to position their services against the Microsoft/Skype proprietary solution. Skype already owns over 20% of the International long distance market, and now the Microsoft/Skype combination can position themselves to drive mobile and enterprise revenue.
2. The acquisition further polarizes Microsoft's enterprise communications strategy by betting on Skype's security plagued product. Also with Skype known for having security issues (including last weekend's Mac related security issue), particularly with its Super Node architecture, the solution is not enterprise grade.  However, this assumes Microsoft is interested in applying Skype to its enterprise voice and communications offerings.  To date, Microsoft has relied on other PBX/Voice Gateway vendors to drive a CPE based go-to-market strategy for OCS/Lync.  It is my belief that Microsoft will try the cloud approach and rely on the Skype service to bolt-on their Lync product. If so, this will be difficult for enterprises to take on given the security fears.
3. CounterPath’s partners have a new common competitor in Microsoft/Skype.   The Microsoft/Skype entity now presents a significant threat of end-point plus communications server and service mix that will cannibalize the core revenues of Network Equipment Providers (NEPs)—across enterprise and consumer segments.
4. Limited customization will be offered by the Microsoft/Skype solution. CounterPath has a thorough understanding that customers (service providers, partners and end-users) want to have customizable solution that work well in dynamic environments.  I see customization requirements increasing going forward, and neither Microsoft or Skype has been known for their branding and customization capabilities.
5. The Microsoft/Skype solution will become a very tightly coupled solution that force-fit's Microsoft’s strategy into the Skype service model – this will ultimately orphan current customers.  And though it was clearly stated that Skype will be run as a separate business unit, MSN/Live/Office 365 will need to find their way into the Skype fabric; which will without a doubt cause not only friction within the Microsoft/Skype combo, but create a significant change in the Skype service offering.

In summary, with our branding capabilities, enterprise-grade client offerings and our vast experience in building and delivering best-in-breed products to our customers and their channels, the opportunity for CounterPath has never been better. And now with the Microsoft / Skype transaction, the magnitude of our opportunity just became very significant, very real and puts us in the perfect position.