Microsoft & Skype, in $8.5B Merger, Could Have Tons of Applications, but Mobile and Kinect are Ones to Watch

5/10/11Follow @curtwoodward

With its $8.5 billion acquisition of Skype this morning, Microsoft (NASDAQ: MSFT) appears to be embracing one of the classic digs at Redmond: It’s grown too big to truly innovate.

According to the companies’ announcement, Luxembourg-based Skype, which has offices and investors in Silicon Valley, will be its own division within the Redmond, WA, software behemoth. Skype’s current CEO, Tony Bates, will report directly to Microsoft head honcho Steve Ballmer. If that kind of structure was something Skype fought for, the fact that it got it could be seen as an acknowledgment that swallowing Skype too fully could mess up a good thing.

Much is being made of the zillion different ways that Microsoft products and services could be integrated with Skype, but two of them are the most meaningful: Windows Phone and Kinect. The Windows Phone combination—if done right—gives Microsoft a killer answer to Apple’s FaceTime and Google Voice.

In a really interesting blog post on the deal, Skype investor Ben Horowitz of Andreesen Horowitz recounts how both of those products were central threats to Skype’s existence, and how Skype responded by growing its user base. (Horowitz also says the investors who bought Skype from eBay saw that the technical team working on Skype was committed to staying with and expanding the service, no matter who was signing their paychecks.)

Over at the Dallas Morning News, Victor Godinez wonders whether the combination will allow Microsoft to challenge the cell phone carriers to drop mandatory voice plans, and open up data-only mobile as a real possibility. It’s also worth noting that Microsoft said Skype will continue to develop apps for other companies’ platforms—but anyone who’s tried to use Google Maps on an iPhone, for instance, will tell you to wait and see how aggressively that happens.

The Kinect combination is intriguing as well. The motion-sensing camera is obviously Microsoft’s biggest consumer hit in quite some time, and has been showing all sorts of really off-the-wall potential uses, like manipulating surgery robots. The Skype combo brings a far less outlandish use to the forefront: powerful videoconferencing, especially for business.

As Todd Bishop at GeekWire pointed out last night, Kinect already had a video calling feature. With Skype’s horsepower and Microsoft’s track record of delivering products that big businesses want to use, the little Xbox add-on could become a major feature in boardrooms.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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