Microsoft’s Skype purchase proves Ballmer ain’t dumb

Making fun of Microsoft and its hefty CEO is always fun. And snarky bloggers and tweeters had a field day after Steve Ballmer announced the $8.5 billion Skype purchase this week, with zingers like “the blue screen of voice” and “tech-support calls to Bangalore will be at a reduced rate.” But if you’re the CEO of Hewlett-Packard or Research in Motion, the Skype buy wasn’t funny, and neither were all the jokes about Google’s dessert fetish after announcements about Android 4 “Ice Cream Sandwich” and its new initiatives in the music and movie spaces.

The mobile platform war is getting hotter by the minute. The Skype megabuy shows that Microsoft has finally, finally realized it has to do something truly radical if it wants to break away from the pack of losers and establish credibility for Windows Phone. Google, meanwhile, is suddenly acting like a grown-up company, making nice with the carriers and, more important, moving to fix the biggest knock on Android: the fragmented platform.

There are all kinds of reasons to wonder how well Microsoft will handle the difficult task of corporate and technologic integration (remember Hotmail?) with Skype, and it will be some time before Microsoft’s new business unit makes a direct contribution to the bottom line. But that’s not the point. With $50 billion on hand, Microsoft can afford it. Ballmer and company now own one of technology’s best brands, a company with some 170 million active users a month and a name that’s well on the way to becoming a verb, as in “I’ll Skype you later.”

And don’t you think a combination of Skype and a Windows tablet or smartphone equipped with front-facing cameras will be a powerful combination? Video calling represented about 42 percent of all Skype-to-Skype minutes for the fourth quarter of 2010, according to a filing with the Securities and Exchange Commission that also outlines the company’s improving financials.

Is $8.5 billion too much to pay? A few hours after the news of the Skype buy broke, I was chatting (via Skype, of course) with my friend Jo who lives south of Santiago, Chile. “Oh my God,” she said when I told her the news. “We won’t be doing this much longer.”

I hope she’s wrong, but her reaction highlights challenge No. 1 for Microsoft: Don’t mess with Skype’s 663 million registered users. Microsoft has a well-deserved reputation for crummy customer service and user-unfriendly software, and people like Jo will be quick to notice a decline in service or usability.

Because Microsoft already has VoIP technology (Lync) in-house, it’s possible there will be an internal fight over the direction of voice technology. That could be a disaster, although making Skype a business unit on par with the others is a smart management move that may keep the combatants at arm’s length. Indeed, Microsoft needs to find a way to keep Skype’s developers and engineers on board, and that’s probably a degree of independence in addition to fat paychecks.

Skype is hardly beloved by corporate IT. Its code needs to be cleaned up to meet enterprise standards. Yeah, some of you are sniggering because you hate Microsoft code, but because it runs in a huge percentage of enterprises around the world, being snobbish is beside the point. (Incidentally, some 37 percent of Skype’s customers say they use the service for business, according to the SEC filing.)

Integration with some Microsoft products like Lync won’t be easy, as my colleague Woody Leonhard has noted, but the biggest opportunity — and the reason I like the deal — is the huge boost it will give to Windows Phone.

Video calling is growing rapidly and is a technology with huge appeal to consumers and businesses. Baking Skype into Windows Phone would give users a reason to buy one, while developers would have more reasons to write to the platform. And keeping Skype out of Google’s hands was critical: Google already has a big presence in telephony with Google Voice and video messaging; Microsoft couldn’t afford to fall further behind.

Unity for Android, at last Google’s “Ice Cream Sandwich” play is easy to understand. Combining Android 2.3 “Gingerbread” and 3.0 “Honeycomb,” respectively the smartphone and tablet versions of Android, makes enormous sense. Along with others at InfoWorld, I’ve beaten on Google to rationalize the fragmented Android platform, and this is a great start.

Only a small percentage of Android smartphones are running the most recent version, a disconnect that confuses users who wonder what they’ll get when they choose an Android smartphone — and that turns off developers. Google is partnering with handset makers and carriers — HTC, LG, Motorola, Samsung, and Sony Ericsson, and AT&T, Sprint, Verizon Wireless, and Vodafone — to create update guidelines, a smart move and a sign that the company is (finally) maturing.

Also announced at its Google I/O conference this week was Music Beta, a service that allows users to store as many as 20,000 songs online and stream them to their computer or Android mobile devices. Additionally, Google unveiled a movie-rental service, featuring thousands of movies that can be streamed or downloaded to Android devices.

It’s a cliché to say that content is king, but like many clichés it’s true. Apple won the hearts of consumers with iTunes and the thousands of apps on its App Store. I don’t expect Google to overtake Apple, but all three announcements made Tuesday should have Steve Jobs looking over his shoulder. They also put enormous pressure on the second-tier mobile players such as HP, RIM, and, yes, Microsoft.

The bottom line on the moves by Microsoft and Google: They’re great news for developers and consumers, and terrible news for HP and RIM, which are slipping further and further into irrelevance in the mobile wars.

I welcome your comments, tips, and suggestions. Post them here so that all our readers can share them, or reach me at bill.snyder@sbcglobal.net. Follow me on Twitter at BSnyderSF.

This article, “Microsoft’s Skype purchase proves Ballmer ain’t dumb,” was originally published by InfoWorld.com. Read more of Bill Snyder’s Tech’s Bottom Line blog and follow the latest technology business developments at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.