Microsoft (NSDQ: MSFT) has received a quick approval from the Department of Justice
Federal Trade Commission for its $8.5 billion purchase of Skype, first announced in May. Meanwhile, Skype is streamlining its executive team, with some key people getting dismissed ahead of a final completion of the deal.
The notice posted by the FTC included no further information about the deal, which will become Microsoft’s largest acquisition to date.
The FTC clearance is the latest, and a significant, bit of approval that Microsoft needs to complete the purchase.
Although Microsoft has in the past faced regulatory problems for some acquisitions — a $1.5 billion purchase of Intuit was blocked in 1994 — this deal has so far gone relatively smoothly.
Now come the real challenges. Here are some of them:
– Microsoft integration. Skype is set to become a standalone division of Microsoft, and it will be led by Tony Bates, who is the current CEO of the Internet telephony company.
But apart from Bates, there are some question marks over how that new organization will be run, and how much of the current structure of the company will be retained going forward.
Apparently, at least eight senior executives at Skype have been let go. They are VPs David Gurle, Christopher Dean, Russ Shaw and Don Albert; CMO Doug Bewsher; human resources head Anne Gillespie; and Ramu Sunkara and Allyson Campa, who joined when Skype bought Qik earlier this year.
Some of these people have been long-time and significant contributors to Skype’s position in the market today. Albert, writes Skype Journal, had been with Skype since 2006 and played a big part in making Skype a “household name” in the U.S. Meanwhile, Shaw, as VP in charge of mobile, effectively spearheaded not only the company’s deals with operators like Verizon, but also played a big part in its huge growth in mobile apps.
The news was first reported by Skype Journal, and then picked up by Bloomberg. Skype has since confirmed some, although not all, of the dismissals.
Why now, you might ask? The positive spin is likely to be streamlining redundant positions, but Bloomberg makes the guess that the timing of the these departures means that Skype will not have to make big payouts to the executives when the Microsoft deal gets completed.
On the services side, we have yet to see how and where Skype will sit in Microsoft’s existing software, specifically in products for consumers and small businesses, which have already proven to be the big users of Skype.
Up to now, Skype has found it a challenge to monetise its audience to any significant extent — it has significantly more users of its free services than it does of its low-cost SkypeIn and SkypeOut services, or other value-added services — so it remains to be seen whether Microsoft will be able to do what Skype has not.
There are also some question marks over the reliability of the service; Skype has had a few large service outages in the last six months.
– Mobile integration. Operators will be watching closely to see how Microsoft integrates Skype into its Windows Phone operating system. Although the service has proven popular on mobile devices, Skype has made few friends among mobile operators and has direct deals with only a handful, which include Verizon in the U.S. and Hutchison Whampoa-owned Three. One mobile operator executive noted to mocoNews that putting too much emphasis on Skype in Windows Phone could alienate some operators.
– Platform-agnostic? At the same time that Microsoft looks to integrate Skype into its own products, it will have to carefully balance that with its other stated goal to keep it platform-agnostic. Both Google (NSDQ: GOOG) and Apple (NSDQ: AAPL) have been slowly building up their own capabilities to offer much more extensive video and instant-message chat services that could be direct competitors.
Skype currently has around 145 million users per week. In 2010, about 42 percent of its calls were made on video. It currently has apps for Apple’s iOS, Nokia’s Symbian and Google’s Android platforms, and there will be one for Windows Phone 7 in the upcoming Mango update.