[By Duncan McLeod]
Microsoft’s provocative US$8,5bn acquisition of Internet telephony company Skype set tongues wagging in the technology industry last week. The deal has been described as everything from a smart strategic buy to desperate flailing about for a strategy.
Two weeks ago, I described Microsoft in this column as an “injured beast” and suggested the company has been behaving like an animal caught in the headlights in the consumer technology market in recent years. I also wrote that it’s far too early to write it off and that it could be on the verge of staging a remarkable comeback.
I based that argument on the very good software the company has produced recently. Internet Explorer 9, its Web browser, is a dramatic improvement on previous releases. Then there’s Zune for Windows, which is the best media jukebox I’ve used on any platform. And the latest version of Windows is snappy and stable.
I recently switched my production machine from an Apple iMac, which I’ve used for several years, to Windows 7. I confess I prefer it, as a work machine. The interface isn’t quite as sexy as Mac OS X’s, and I can’t accurately measure my productivity gains, but software like Microsoft OneNote, a note-gathering tool, has helped me work more effectively.
Still, Microsoft has a problem: in a world of iPhones and iPads, it has come to be perceived as uncool. And it’s the company’s own fault. It took too long — more than three years — to develop software that could even begin to counter the iPhone. And it still hasn’t delivered an operating system targeted at tablet computers (it’s working on one that should be released next year). In the hottest consumer technologies in recent years, Microsoft has been almost nowhere to be seen.
Of course, Apple would love to be in Microsoft’s shoes in business computing. It’s here that Microsoft is as strong as ever. Few large companies give any thought to opting for Apple products over PCs running Windows and Office. In business, Microsoft is still the de facto standard.
Some might argue Microsoft should simply stick to what it’s really good at — enterprise computing — and leave the consumer technology space to companies such as Apple and Google. But that would be a mistake, for one very important reason. More than ever, consumer technologies are finding their way into business.
The iPad may not be sanctioned by many corporate technology departments, but employees are buying the devices anyway, and using them to access company systems. A CEO predisposed to Apple or to Google may eventually be more inclined to direct enterprise spending away from Microsoft.
In that context, Microsoft’s Skype acquisition appears to make some sense, even if the high price tag doesn’t. The company wants to integrate Skype into a wide range of both consumer and business products and applications. Expect it to pop up in services and software as diverse as Outlook and Xbox Live, bridging the gap between business and consumer tech.
Potentially, the acquisition also gives Microsoft the basis for building some kind of social network. With 663m registered Skype users — 170m active in 2010 — it has a large platform of users on which to build a new social media ecosystem. And with plans to integrate Skype into Nokia smartphones running Windows Phone 7, it could turn out to be a powerful play for Microsoft in time.
Yes, Microsoft is fighting competitive fires on many fronts. And yes, it has clearly upped its appetite for risky deals. But surely that’s far preferable to doing nothing and risking atrophy?