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Is $8bn Skype deal a sign of Microsoft’s desperation about its flagging brand?

It’s not signed as we write but Microsoft is likely to agree to pay £8bn today to buy loss-making phone and video company Skype (the price includes nearly $700m of debt).

Oddly enough $8bn is roughly the amount Microsoft is estimated to have lost on its online division (which includes search engine Bing) over the past six years.

So it looks rather like double or quits.

Microsoft still makes bundles of money from Windows and Office even though both seem anachronistic in the everything-on-the-internet era. The company, led by CEO Steve Ballmer, has about $50bn in cash and short term investments so Skype wouldn’t make much of a dent in its coffers.

Even so $8bn is a lot of money and you do wonder quite what Microsoft’s strategy is. Clearly it could link Skype in with Office but it’s doubtful if Office users would really want to communicate with each other by phone or video. It’s tedious enough tapping a computer.

Or it could plug it into its Xbox gaming universe but surely users just want better games not to be able to see who they’re playing against.

Maybe it’s a brand issue, Microsoft seems to have finally realised that its old ‘everybody hates us, we don’t care’ attitude is counter-productive. Skype is undeniably popular with its 636m users (it’s free). But could Microsoft resist charging for it?

I’ve no idea how much Microsoft has spent in recent years on consultants but it could do with a bit of decent advice on what the brand currently stands for and ways of improving it.

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Maybe its new ad agency will help. It recently fired JWT and now has Windows at Deutsch with the rather more important Office and Bing leaning towards Crispin Porter + Bogusky although no announcement has been made yet.

On this, by the way, I wonder if the hyperactive networker Sir Martin Sorrell of WPP has been on the phone to Ballmer. Sir Martin is very keen on company-wide offers to big global clients and, even though his last such effort with custom-built agency Enfatico and Dell imploded, he doesn’t give up easily.

Microsoft would do better to sort out what its existing huge business stands for than snapping up over-priced techie companies here there and everywhere.

Would even Sir Martin have the nerve to say this to the ferocious Ballmer?

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.
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