Midweek Tech Scan: Why does Microsoft own Skype?

The Redmond giant completes its $8.5 billion acquisition of the popular company, but how it intends to make money is unclear.

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The Redmond giant completes its $8.5 billion acquisition of the popular company, but how it intends to make money is unclear.

Microsoft keeps pushing ahead on several fronts in the consumer area, including one of the more mysterious acquisitions in the tech field.  This past week, Microsoft completed the acquisition of Skype, that ubiquitous, pioneering computer based phone service that makes it possible to talk to people worldwide for free — if they have a Skype app on their computer — or call land lines and cell phones at low cost.

I’ve been impressed by the number of news operations like CNN and NBC who regularly interview people live on air from their Skype webcams.  But all the same, it raises questions about why Microsoft thought it was worth $8.5 billion to buy the company.  In the company’s press release, Microsoft Skype division president Tony Bates said, “By bringing together the best of Microsoft and the best of Skype, we are committed to empowering consumers and businesses around the globe to connect in new ways. Together, we will be able to accelerate Skype’s goal to reach 1 billion users daily.”

One area where Skype will be closely integrated will be the company’s plans for developing the Xbox as the center of home entertainment. Microsoft recently announced its plans to dramatically expand the gaming console's services beyond its current affiliations with Netflix, Hulu, and ESPN3; the new lineup will include 40 world-leading TV and entertainment providers, plus the use of its Kinect device to allow people to use gestures and voice commands to control the whole system.

Perhaps Microsoft sees a bigger business opportunity with integrating Skype into Microsoft Outlook and Lync, its new mobile communications service.  Maybe there’s a new market there that will generate sufficient revenue to justify the $8.5 billion Skype expenditure. 

What is for certain is this step will be closely watched by investors and the public alike.

While the Xbox is being groomed for its home entertainment role, the company isn’t forgetting the console’s roots as one of the world’s leading gaming systems. According to Microsoft’s official blog, the Xbox has sold more units than any other device for 15 of the last 16 months.  Translated into dollars, the company noted that sales of hardware, software, and accessories hit $534 million — the most for any console and twice as much as any competitor (take that, Sony Play Station and Nintendo Wii) and 6 of the top 10 console game titles.

Gaming consoles are still part of a trend that needs to be recognized as a major cultural force in the lives of our young people. And I do mean “major.” A new study by the NPD Group, quoted in Tech Crunch says that 91 percent of children from 2 to 17 — a group estimated at 64 million kids — are playing games.  One can guesstimate that the rise in gaming activity has been spurred by the adoption of smartphones and devices like the Nintendo DS, and the attitude of parents — themselves part of a generation brought up on gaming — that has produced this phenomenon.  The report further notes the greatest growth has been in the 2-5 age group, and has increased from 8 percent in 2009 to 38 percent in 2011.

And just in case any of us in the Seattle area thinks he or she hears too much about Microsoft, be advised not to turn on the TV. Anywhere. According to GeekWire, the company is starting the largest ad campaign in its history, set to run in 35 countries, promoting a range of consumer products, including Windows, Office, Xbox, and Windows Phone. 

Here’s some other gaming news, but this may be something for the over-5-year-old set. If you’re a pinball fanatic, you can join four Seattle parties starting this weekend in celebration of the introduction of the new Transformer pinball game from Stern Pinball.  If you’re a fan of the real thing, and not just playing Wild West pinball on your iPhone, Transformer introduction parties will be held on Oct. 21 at the Seattle Waterfront Arcade; Oct. 22, at the Seattle Pinball Museum; and at Shorty's (2222 A 2nd Ave.) on Oct. 29. (There's at least one other reportedly coming up but details were lacking; if I learn more I'll update the information in this weekend's Tech Scan.) All parties will be held from 6 to 9 p.m. 

So it's not exactly hi tech gaming, but it should be great fun.

On the subject of phones, and whether this is the right time to upgrade, one question that you need to answer is if you need to take advantage of some of the new swift and powerful phone networks now available to consumers.  If you have a phone with limited features, there’s probably little need to upgrade. 

But if you’re hankering for a feature-rich smartphone, and networks with the speed to give them the running room they deserve, then take note of this news from Verizon. The company announced an independent study that showed the network’s 4G LTE network ran rings around the competition. Conducted by Root Metrics of Bellevue, the company noted it performed over 27,000 call, data, and text tests in the greater Seattle area over a seven-day period in September. Off the shelf Android phones were used for the test. The results showed Verizon first in speed, followed by AT&T, T-Mobile, and Sprint in that order.  A copy of their report is here.


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