May 10, 2011
Skype's New Exit Strategy: Acquisition by Microsoft
Posted by Christine Hurt

Just yesterday I wrote about upcoming technology IPOs and mentioned that Skype's August 2010 registration statement was getting a little stale.  But as of a month or so ago, folks were still waiting for Skype's upcoming IPO.  What a difference a day makes!  Microsoft announced today that it will acquire Skype for $8.5 billion in cash.

So, what factors would delay the Skype IPO but not scare off Microsoft?  Well, Skype could have been waiting for an upturn in the IPO market.  An acquirer would not necessarily care about that and might think they could get a bargain if venture capital wanted a now-ish exit.  But the IPO market seems to be not so cold right now.  And Microsoft doesn't seem to be getting a bargain.  Earlier reports thought Skype would try to get a valuation at IPO of $6-7 billion.  (Pretty good for a company with no clear record of profits.)  $8.5 billion is more.  Can Microsoft add value to the assets it is acquiring?

What about management?  Skype changed CEOs last Fall.  Perhaps management issues were scaring away the IPO smart money.  An acquisition takes care of management issues.  But, all of this is armchair blogging about an interesting development in social networking!

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