The Power of Ten

by admin

What Microsoft Gets for $8.5 billion

Skype made big news this week when it announced that Skype was going to be purchased by Microsoft for $8.5 billion.

That's billion with a bee. As in 9 zeros before we get any where.

This makes it a great time to look at what Microsoft got for its $8.5 billion.

170 million users

Skype has 170 million registered users. According to Skype, these 170 million users spent 207 billion minutes talking to each other.

That means that Microsoft values each user at $50.

However, Skype has also released revenue figures. According to those figures, Skype made $860 million in 2010.

That means that Skype receives $5 from each user.

Why the power of 10, Microsoft? Why?

In addition, you know those 200 billion minutes? Those earned Skype that cool billion dollars at about 5 cents a minute (4.1 cents a minute).

Microsoft is paying 41 cents a minute.

Yes, this is basic arithmetic. Yes, Microsoft is not just paying money to get money – they're getting Skype's network, Skype's employees, and Skype's brand. They're also preventing competitors, like Google or Facebook or Apple from buying Skype and building up their own brand (apparently, their offers were in the $2 to $5 billion range).

But is that worth a 10 to 1 investment? Especially since Skype lost 7 million last year?

We like Skype at We want it to stay around. But we also like it when things make sense.

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