Why did Microsoft spend billions on Skype?

The main assets would be :

extra $800m+ on line revenue

27 million active Skype users

Microsoft can “bundle” their existing on line products such as Bing and Hotmail to the millions of Skype users.

Skype has readymade relationships with Telco’s that terminate their internet based calls onto their fixed line networks. This will be useful in their corporate market where they are pushing Lync hard as a PBX replacement.

No doubt the first development will be a Skype button appearing on your MS Hotmail tool bar.

Also there is an overlap with their Lync unified communications / presence client and the Skype client.  

On the financial side, Skype will add $860m revenues to Microsoft’s on line services division. This is the lowest revenue earner within the Microsoft group with existing revenues of $2.2 billion and is also the only division to have made a loss of $2.4 billion.

Microsoft’s previous attempts to enter the on line consumer market have failed, Yahoo and Facebook’s management turned down Microsoft’s takeover attempts.

Tony Bates, Skype’s CEO stated cinema trailers being swapped over Skype as a growth revenue stream. This will add to Microsoft’s advertising revenue it currently gets from its Bing search engine.

During their joint press conference, I thought it was interesting that Steve Ballmer refused to mention Android when asked about continuing Skype support for non Windows platforms?

All he did say was we will support the Apple Mac platform?

Overall it seems a wise move for Microsoft, so long as it can realise a $8.5 billion increase in on line services (adverting revenue, group video conferencing, calls to non Skype users etc.) over the next two or three years?