Microsoft: Price of Skype bid questioned

10th May 2011

The Guardian reports that the deal that has shocked analysts who think it would be a substantial overpayment for the company.

It repports: "The acquisition, would be Microsoft's biggest, ahead the $6bn it paid for online advertising company aQuantive in 2007, and would bring it 660 million users worldwide while giving it a foothold in voice and video communications.

"Analysts suggested the service could be integrated into existing Microsoft products such as its Xbox 360 games console and Kinect gaming systems, or even into its flagship Office product to let users collaborate more effectively."

The Wall Street Journal which first reported the deal says Microsoft Chief Executive Steve Ballmer, though, sees the Internet as an essential battleground for Microsoft and that investors have become increasingly concerned about Microsoft's ability to squeeze continued growth out of those businesses, as rival technologies from Apple, Google and others put more pressure on profits.

In his tax blog Richard Murphy agrees with those analysts who say Microsoft has got this one very, very wrong.

He adds: "It's not just the price is too high, although I cannot see how something which is fundamentally free could be worth as much as Microsoft paying for it.  The real issue is something fundamentally more important than that.

"As the Bank of England noted yesterday,  they use an intense myopic  tendency within financial markets at present.  They have always taken a short-term view,  but that trend is becoming increasingly prevalent.  I suspect that the Microsoft / Skype  deal is indicative of this.  Microsoft, like most large businesses, is sitting on a massive pile of cash, hidden somewhere in the world, as far away from a tax authority as possible. There is good reason for this. "

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