Ballmer: Microsoft won't tie Skype to Windows

But Skype will be tightly integrated with Office, XBox and Windows Phone after Microsoft buys the VoIP call provider

Microsoft will integrate Skype's calling features into many of its key products, including Office, the Xbox and its Windows Phone software, but it will it will also continue to offer Skype for competing platforms, CEO Steve Ballmer said Tuesday.

"Products and services that Skype users know today will grow and be enhanced," Ballmer said at a San Francisco press conference to announce the deal. "We will continue to invest in Skype for non-Microsoft devices."

It's an important message for Microsoft to sell, since Skype's massive user base -- which includes users of the iPhone, Android phones and other competing devices -- is a big part of why it agreed to pay US$8.5 billion to buy the company. The deal is Microsoft's biggest to date, and it needs to be sure that Skype users won't flock to alternatives like Google Talk after the acquisition.

Skype has 170 million active users, and is registering 600,000 new users each day, Ballmer said. "The number of users is accelerating, which is really exciting to me," he said.

Microsoft considered partnering with Skype but decided to buy the company because of the central role online video calls are having in communications, and because Microsoft can do more with Skype's technology through an acquisition, Ballmer said.

"We'll move beyond emails and text to rich communications experiences in the future," Ballmer said. "Talking to friends and colleagues around the world will be as seamless as talking to them across kitchen table or the conference room."

Microsoft made an unsolicited offer to the investment group that owns Skype, led by Silverlake Partners, in April, and signed the deal Monday night, Ballmer said. Microsoft expects to close the deal this calendar year, pending regulatory approvals.

"This is a big day for Microsoft and a big day for Skype," Ballmer said with his usual enthusiasm. "By bringing together the best of Microsoft and the best of Skype, we will empower people around the world with new technologies that should bring them closer together."

It wasn't clear how Microsoft will make Skype any easier to use for non-Microsoft users. But it's likely that Windows users will be able to fire up a Skype call quickly from within Outlook or Office, for example, or on a Windows phone.

"It's pretty obvious today that not everyone is doing video, particularly from their phone," Ballmer said. "That's an opportunity where there are lots of things that can be done."

Increased advertising revenue is another key driver for Microsoft, Ballmer said. Skype has just started to run full page ads at the start of video conference calls, and Ballmer hopes to build on that with new advertising opportunities.

"We think advertising is a very power monetization scheme for us," said Skype CEO Tony Bates, who joined Ballmer on stage.

Skype had $860 million in revenue last year and is "a strong and growing business," said Microsoft CFO Peter Klein. Its revenue is growing by 20 percent a year, he said. Its earnings before taxes and other deductions were $264 million last year, and are growing at 40 percent a year, he said.

Microsoft has big customer bases for many of its products and wants to link them together through Skype, Ballmer said. "We want to stitch together the world," he said.

He sees more business users connecting via Skype calls in the future, and also sees video calls allowing parents to attend Parent Teacher Association meetings remotely, for example, or gamers to play online as if they are in the same room.

He seemed particularly excited about the opportunities in business, and said Skype will enhance Microsoft's new unified communications product, Lync.

Microsoft announced earlier Tuesday that it had agreed to acquire Skype. The investment group had earlier acquired Skype from eBay, which originally bought Skype in 2005.

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Tags Microsoftbusiness issuesskypevoiptelecommunicationMergers / acquisitions

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James Niccolai

IDG News Service
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