- The Washington Times - Wednesday, May 11, 2011

Tuesday’s announcement of the $7.7 billion acquisition of voice-over-Internet-protocol (VoIP) phone service provider Skype by Microsoft Corp. has set off all sorts of alarm bells. Aping the old grade-school game of “Telephone,” rumors are flying thick and fast as to What It All Means for consumers, developers and investors.

From this writer’s perspective, which stretches back to Microsoft’s early years, long before it released the Windows operating system, a little deep breathing might be in order.

If, as James Carville and George Stephanopoulos formulated in the 1992 presidential race, it was “the economy, stupid,” that mattered, here, it’ll be the post-merger developments that matter most. The money Microsoft tossed around the other day is substantial, but it’s also chump change if Skype does not live up to its potential.

I’d imagine at least three immediate benefits to Microsoft once the deal goes through. CEO Steve Ballmer discussed one of them on Tuesday, specifically incorporating Skype functions into the Xbox 360 gaming system and its Kinnect add-on functions. Not only will you be able to play online against your new friend in Shanghai, you’ll be able to chat with them, too - perhaps.

It’s also not beyond possibility that Skype will be integrated into the firm’s Internet Explorer Web browser, version 9 of which was recently released. I could see Skype replacing the “Communicator” functions in Microsoft Office for Mac 2011, and a similar add-on to the Windows version of Office. Got an email from Cindy in Sheboygan, Wis.? You can ping her back via email or VoIP call, your pick.

And, third, baking the Skype service into Windows-based cellphones could help transform that industry, and perhaps save that product line, too. Microsoft’s effort to field a competitor to Apple Inc.’s iPod, called Zune, died for lack of consumer interest. Microsoft’s mobile phones, once industry leading, retain a veneer of age and creakiness in the face of the iPhone and Google Inc.’s Android operating system. A Skype-based refresh could do wonders.

The main thing for Microsoft Corp. here is, frankly, to not mess up what it just bought. The technology industry has been rife with such foul-ups, most recently the demise of the Flip handheld video camera, a year or two after Cisco Systems paid around $500 million for the consumer product’s maker. Smartphones killed the Flip video star, Cisco said - without remembering that RCA, Kodak and a couple of other firms are still happily selling similar products. The greater truth may be that Cisco didn’t know what to do with Flip, and finally conceded defeat.

Now, Microsoft has had good and bad luck with its acquisitions, and the key strategy they need to manifest here is that of leaving Skype alone as much as possible. Use the VoIP technology as much as possible in your products, Mr. Ballmer, but don’t mess with operations unless you’re certain they can be improved.

Skype, after all, is working quite well on a number of levels. It has millions of customers around the world, and it’s highly regarded. Its presence on the iPhone is a measure of that regard; Apple initially didn’t want to put a VoIP application in the iPhone repertoire.

Both Skype and Microsoft have a rival in Google on a couple of levels. Google is challenging Microsoft on the mobile phone hardware/software front, but Google also has its VoIP service, Google Voice and qualitywise, both are about equal. Google will transcribe your voicemail into text for you, though.

So “MicroSkype” will do well to keep Mr. Ballmer’s promise of maintaining Skype on operating systems that aren’t Microsoft Windows. They’d do better reaching out to those other computing (and mobile) platforms with as much gusto as they can summon up. The end result would be profit and happiness, and not a Cisco-like failure.

c E-mail mkellner@washingtontimes.com

• Mark A. Kellner can be reached at mkellner@washingtontimes.com.

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