Investopedia: Will Skype Transform Microsoft?

Any time a large company has both a lot of cash and a lack of growth, analysts love to play what I call the Chinese Menu Game. Pick a company from Column A, pick another one from Column B, and voila ... the analyst has a plan as to how the company can effectively exploit its cash hoard and reignite growth, as well as a call for that analyst's institutional salesforce to make on an otherwise slow news day. 


Though there was no particular shortage of rumors surrounding possible bidders for Skype, including Google (Nasdaq:GOOG) and Facebook, and no shortage of rumors about possible targets for Microsoft (Nasdaq:MSFT), those two lines of thought never really intersected. At least, not before Microsoft announced on May 10 that it was acquiring Skype in a deal worth a total of $8.5 billion. (For more, see A Primer On Investing In The Tech Industry.)

Skype Gets Another New Home
Despite being fairly good at attracting users and becoming a significant presence in overseas voice calls, Skype has had a hard time finding a permanent home. The company was bought by eBay (Nasdaq:EBAY) roughly two years after its founding, but never really lived up to eBay's hopes of it as a new growth platform beyond auction services. As a result, three years of ownership and a $1 billion-plus impairment later, eBay sold 70% of Skype to a private investor group. 



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