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Microsoft’s week started off and ended with a promise of big future things to come.
The U.S. Department of Justice approved Microsoft’s $8.5 billion acquisition of Skype. That means Redmond now faces the singular challenge of digesting Skype’s assets into its various products, including the Lync unified communications platform and Outlook, while preserving Skype’s enormous brand equity. Moreover, Microsoft has to monetize Skype in such a way that its sizable built-in audience, so used to paying little-or-nothing for VOIP (voice over IP) and video calling, doesn’t flee to a competing platform.
According to a June 19 Bloomberg report, itself citing unnamed “people familiar with the matter,” Skype has already started firing senior executives ahead of the acquisition’s final closing. And surely Microsoft’s own managers and engineers are already working at how to best digest this sizable prize.
Skype had been a belle at the acquisition dance before. In 2005, eBay paid some $2.6 billion in cash and stock for the communications company. Four years later, the auction Website sold the majority of its Skype holdings to a team of private investors (including Silver Lake Partners and Andreessen Horowitz) for $1.9 billion in cash. While Microsoft’s $8.5 billion represents a substantial markup, CEO Steve Ballmer and his executive team evidently felt the price was right.
“While it’s true that Skype has been slow to make money off its service, the potential is there,” Forrester analyst Ted Schadler wrote in a May 10 blog posting, soon after the deal was announced. “Local phone numbers, three-way video conferencing, business administration, and making calls to real phone numbers are all things that people will pay for.” It could also boost the consumer appeal of Microsoft’s more business-centric products, including Lync.
It remains to be seen, though, how exactly Microsoft will weave Skype into those products, particularly the cloud-based ones on which Redmond is betting so much of its future.
Speaking of the cloud, Microsoft wrestled with another BPOS outage this week, with some North American users of the messaging and collaboration service reporting network connectivity issues starting the morning of June 22. “Source of network issue identified and hardware components replaced. Next update within 30 mins,” read the Official Microsoft Online Twitter feed at around 1 p.m. EST June 22.
Around 50 minutes later, a follow-up Tweet read: “Service restored for Sign In app. Health Dashboard still showing intermittent access issues. Next update within 30 mins.”
On May 10, malformed email traffic sparked a growing message backlog that impacted some BPOS customers for up to six to nine hours. The issue occurred again May 12, compounded by a separate but related problem that led to consumer delays as long as three hours. In the wake of both those outages and this most recent one, Microsoft executives have been insisting the issues affecting BPOS won’t come into play with Office 365, Microsoft’s upcoming cloud-based productivity platform (and a BPOS rebranding). Currently in beta, that service is expected to officially launch next week.
“O365 should provide more stable service,” read a June 22 Tweet on the Official Microsoft Twitter feed. “It is built from the ground up new and reports and expectations are very good.”
Microsoft fully restored BPOS service later on June 22, eventually blaming network equipment issues in the data center.
The past few days have also offered (possible) glimpses of two upcoming Microsoft products: the next version of Windows (widely referred to by its internal codename, “Windows 8”), and the first Nokia smartphone running Windows Phone.
“A new build of Windows 8, build 7989, has surfaced,” the blog Redmond Pie reported June 18. “Slowly but surely, it’s finding its way onto file-sharing sites, and some Windows enthusiasts have already dug deep into it.”
Features discovered in the build supposedly include SMS (Short Message Service) support and per-feature licensing. In theory, the latter could allow Microsoft to offer users a “bare bones” version of Windows 8, with the ability to unlock additional features for a fee. Microsoft tried something similar with Office 2010, offering a free, stripped-down, ad-supported version of its latest productivity suite pre-installed on certain PCs; a single-use license on a plastic card, purchased from a retailer such as Best Buy, would unlock the functional version.
Other Microsoft-centric blogs such as Winrumors posted notes and video about the Windows 8 build’s virtual keyboard, which would be necessary for tablets. The keyboard, which is capable of deploying in an ergonomic, “thumbs optimized” configuration, has been glimpsed before. The next version of Windows will support SoC (system-on-a-chip) architecture, in particular ARM-based systems from partners such as Qualcomm, Nvidia and Texas Instruments, which in turn will give Microsoft the ability to port it onto tablets and other mobile form-factors.
Near the end of the week, Nokia CEO Stephen Elop offered an audience a glimpse of what looked like a Nokia N9 smartphone running Windows Phone, Microsoft’s mobile operating system. The N9, which runs a MeeGo operating system slated for mothballing by Nokia, marries a curved 3.9-inch AMOLED (active-matrix organic LED) screen to a body engineered from a single piece of polycarbonate. Nokia plans to transition wholly to Windows Phone as the software platform for its smartphones, with the first devices scheduled to make their debut at the end of 2011.
By then, Microsoft will be even further underway with its cloud projects, Windows 8 development, and Windows Phone rollout. Each of those efforts, of course, will face their own unique challenges.