Microsoft buys phone firm Skype

 10 May 2011 Last updated at 18:18 ET Steve Ballmer (left) and Tony Bates promise "new capabilities and new features" for Skype

Microsoft has confirmed that it has agreed to buy internet phone service Skype.

The deal will see Microsoft pay $8.5bn (￡5.2bn) for Skype, making it Microsoft's largest acquisition.

Luxembourg-based Skype has 663 million global users. In August last year it announced plans for a share flotation, but this was subsequently put on hold.

Internet auction house eBay bought Skype for $2.6bn in 2006, before selling 70% of it in 2009 for $2bn.

This majority stake was bought by a group of investors led by private equity firms Silver Lake and Andreessen Horowit.

Other major shareholders include tech-firm Joltid and the Canada Pension Plan Investment Board.

Shares in Microsoft ended the day in New York down 0.5% at $25.68. In contrast, eBay - which owns a stake in Skype - saw its share price rally 2.5%.

'Defensive move'

Microsoft chief executive Steve Ballmer said: "Skype is a phenomenal service that is loved by millions of people around the world.

Continue reading the main story  Tim Weber Business editor, BBC News website

It's a done deal: Microsoft has bought Skype for a whopping $8.5bn.

That's a lot of cash for an eight-year-old company that's not making a lot of money.

So what's in it for Microsoft?

For starters, the firm gets well over 600 million users who make Skype the world's largest phone company for international voice calls.

More importantly, Microsoft buys into a lot of potential.

Marry Skype's software with the Xbox Kinect and an HD television set, and Microsoft can make a powerful argument for getting into millions of living rooms.

Think beyond teleconferencing for the whole family: there's one-on-one training, home schooling, even patient care delivered remotely and in vision.

Smarten it up for the corporate world, and Microsoft can challenge the telepresence business of firms like Cisco and Polycom.

And Skype is multi-platform, reaching into the worlds of Apple and Linux.

Finally, Skype is mobile, and can be paired with Windows Phone 7.

The hitch: Microsoft boss Steve Ballmer will have to work hard to integrate Skype, to ensure the voice/video-over-the-internet company is not strangled by his firm's notorious bureaucracy.

"Together we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world."

Skype will now become a new division within Microsoft, and Skype chief executive Tony Bates will continue to lead the business, reporting directly to Mr Ballmer.

"It's a strategic asset and a defensive move [for Microsoft]," said Colin Gillis, an analyst at BGC Financial.

"If they can put it on Windows 8, it gives them an advantage. It helps them in the tablet market."

Other analysts say Microsoft's aim in buying Skype is to improve its video conferencing services.

Price concerns

Although the price tag of $8.5bn will not stretch the US giant, some experts have questioned whether it is paying too much for a company that has struggled to turn a profit.

Michael Clendenin, managing director of consulting firm RedTech Advisors, said: "If you consider [Skype] was just valued at about $2.5bn 18 months ago when a chunk was sold off, then $8.5bn seems generous.

"[It] means Microsoft has a high wall to climb to prove to investors that Skype is a necessary linchpin for the company's online and mobile strategy."

This view was echoed by Ben Woods, head of research group CCS Insight.

"The big unanswered question is how do Skype assets work for Microsoft... how do you justify the price?" he said.

Skype was founded in 2003.

Calls to other Skype users are free, while the company charges for those made to both traditional landline phones and mobiles.

Hold the Phone! That Sure Sounds Like Saddam Hussein.

BAGHDAD — There haven’t been any Saddam sightings, yet. But he is still in the house, some Iraqis believe, and was heard from just this week.

Saddam Hussein would have turned 74 on Thursday, and a steady stream of people visited his grave site near his hometown, Tikrit, passing out sweets to fellow mourners and curiosity seekers.

But to some Iraqis he will never die.

Since the former dictator’s execution in December 2006, numerous conspiracy theories of the Elvis variety have percolated. And with precision timing on the eve of Mr. Hussein’s birthday, a new YouTube video landed that depicted an actual recent phone call between a member of Iraq’s Parliament and a man who claimed to be Mr. Hussein, whose voice and inflection so resembled that of the former dictator’s that it even gave pause to those who are convinced that Mr. Hussein is dead.

“When I heard Saddam’s voice on the Internet, I cried so much,” said Ahmed Kamil, 43, who was visiting the grave site. “I felt that I was dreaming.”

One cultural remnant of Iraq’s years of totalitarianism, when people lived in fear of a dictator’s secret police, is a tendency for rumors and conspiracy theories to flourish. Last year, after the parliamentary elections, a rumor that Prime Minister Nuri Kamal al-Maliki had been assassinated lived for days until Mr. Maliki appeared on television. With Mr. Hussein, like Elvis, there will probably always be a tiny thread of society that doubts the official version of events.

“The U.S. should dig up his grave and check for his DNA,” one commenter wrote Thursday on the Arabic news Web site Hawamer.

The tale of Mr. Hussein’s recent phone call began about two weeks ago when Hassan al-Allawi, a writer and politician who was once a Baath Party member and close friend of Mr. Hussein, received a phone call at home. When he realized who the caller was purporting to be, he put the voice on a speaker for his dinner guests.

“The guests were scared,” Mr. Allawi said in a telephone interview Thursday from Beirut. “They said, ‘That is Saddam.’?”

Mr. Allawi, who stood by Mr. Hussein’s side as he rose to power and was briefly imprisoned before fleeing into exile, said he maintained a fondness for his former patron, even though he had embraced the democratic transition here as a member of Parliament. “Until this day, I love Saddam,” he said.

The call, he said, was jarring. “Saddam used certain words and emotions when he talked to me,” he said. “And this guy had all those words and emotions in this call.”

He added, “If I didn’t believe that Saddam was killed, I would say this is the real Saddam.”

Mr. Allawi said he was surprised that a recording of the call, set to still photographs of Mr. Hussein and himself, was released on YouTube this week.

He said he believed that the perpetrators of the prank chose him, “because I was such a close friend of Saddam.”

During the call, which Mr. Allawi said he listened to on YouTube and verified as accurate, he never questioned the identity of the caller, but seemingly embraced the deceit. Mr. Allawi noted to the caller that even after being exiled he maintained his affection for Mr. Hussein.

The caller imitating Mr. Hussein replied, “First of all, I thank you Hassan. I thank you, Hassan. Saddam is alive.”

Mr. Allawi later said, “I am happy to hear your voice,” and told the caller that he was now working for the good of Iraq, not his personal gain like other politicians.

The caller claimed that in 2006 it was actually a body double of Mr. Hussein named “Mikhail” who was executed. Mr. Hussein often used body doubles, and for this reason many of the conspiracy theories about Mr. Hussein’s death suggest that it was one of these men who was hanged. The caller told Mr. Allawi to give a message to the Iraqi people that the Baath Party would return to power.

“I will burn the Green Zone and I will make it red with the blood of the traitors,” the caller said.

On a Facebook page called “The Great Saddam Hussein,” which counts about 14,000 members, one member who identified himself as Ahmed Ismael wrote of the video: “Saddam is a great leader, whether he was killed or is alive. Honestly, we hope he is alive so he can bring Iraq to what it was before.”

Even some who are still supportive of Mr. Hussein but believe he is dead, saw a conspiracy behind the posting of the YouTube video.

Laith Jamal, 37, visited Mr. Hussein’s grave on Thursday after listening to the recording of the phone call. “I was happy when I heard the recording because it sounded like Saddam speaking,” he said. “But I think this recording was published by the traitors of the Green Zone to give a bad image of the great Saddam, and to keep pressure on the Sunni areas that supported Saddam.”

Reporting was contributed by Omar al-Jawoshy and Duraid Adnan from Baghdad, and an employee of The New York Times from Tikrit, Iraq.

 

Apple and Google Use Phone Data to Map the World

 

As those two companies battle for dominance in mobile computing, they have increasingly been using their customers’ phones as sensors to collect data about nearby cell towers and Wi-Fi hot spots.

Google and Apple use this data to improve the accuracy of everything on the phone that uses location. That includes maps and navigation services, but also advertising aimed at people in a particular spot — a potentially huge business that is just getting off the ground. In fact, the information has become so valuable that the companies have been willing to push the envelope on privacy to collect it.

“Google envisions a world where even a small business can promote products to consumers nearby on a mobile device,” said Alistair Goodman, chief executive of Placecast, a location-based advertising company here. “That is a massive market.”

The companies are using the cell tower and hot spot data to build maps of the world, maps that help smartphones quickly pinpoint their locations. Using the signals as navigational beacons is particularly useful in places where GPS satellite signals are weak, like urban areas or anywhere indoors.

Shifting allegiances and legal battles in the world of location services suggest competition in this market is heating up.

Apple initially relied on technology from Skyhook Wireless, a company that was a pioneer in the technique of using Wi-Fi hot spots for location. But last year it began collecting its own data as well. And late last year, Skyhook sued Google, charging that Google had copied its technology and persuaded Motorola to break contracts with Skyhook and use Google’s competing service.

Google and Apple have said that they collect the information anonymously and use it to keep their databases of Wi-Fi hot spots up to date, not to track individuals. But because a person’s location is delicate information, the practices have raised privacy fears.

The use of this data by the companies has been under scrutiny since last week, when two technology researchers reported that a file stored on many iPhones and iPads keeps track of all the locations visited by a user. The file is unencrypted and is copied to people’s personal computers when they sync their devices.

The report prompted lawmakers in the United States to ask Apple for explanations. Several European governments said they would open investigations into Apple’s practices. On Monday, two customers sued Apple accusing it of privacy invasion and computer fraud. They contend the company is secretly recording and storing the location and movement of iPhone and iPad users.

Late last week, Google said it was collecting information about nearby networks from Android users, though it said that it was not tracking individuals and that it allowed users to decline to participate.

Lisa Madigan, the attorney general of Illinois, wrote to Google and Apple on Monday asking them to explain their location data collection practices.

Apple has declined to comment on the matter.

On Monday, the Web site MacRumors published an e-mail said to be from Steven P. Jobs, Apple’s co-founder and chief executive, in which he replied to a person who had said he planned to switch to a Google Android phone because Google did not track him. The reply said: “Oh yes they do. We don’t track anyone. The info circulating around is false.”

Apple declined to confirm the authenticity of the e-mail.

Some security specialists said they believed Apple was not tracking people, but rather collecting data to update its location databases, since Wi-Fi networks can quickly come and go. A letter sent from Apple in July to two members of Congress, Edward J. Markey, Democrat of Massachusetts, and Joe L. Barton, Republican of Texas, appears to confirm this and provides the most detailed explanation of the technology.

In the letter, Apple said it collects the location data anonymously and only when consumers agree to use its location-based services like maps, or any apps that ask for a user’s location, and for its advertising system, iAds. The company said it began relying on its own databases for location information in 2010. Explaining its need to collect data from its customers’ phones, Apple wrote, “These databases must be updated continuously.”

Security researchers said that they believed that the file with location data stored on iPhones and iPads was meant as a “cache” that would help the device pinpoint its whereabouts faster, and that it could help feed Apple’s giant database of network locations. But they said Apple should have been more diligent about encrypting the file and deleting old data.

“I don’t know why they would want to keep all that data on the device,” said Mark Seiden, an information security consultant in Silicon Valley.

Skyhook began collecting data about Wi-Fi hot spots by sending a fleet of more than 500 cars to drive around the streets of every major city in the United States, Europe and many Asian countries.

“We drove the world,” said Ted Morgan, Skyhook’s chief executive. The company updates the database by sending its cars to remap certain areas and by using phones as sensors when a user requests location data.

Google, which initially collected data on Wi-Fi hot spots with the same fleet of cars that was taking photos for its StreetView service, said it stopped doing so last year after it was found to have collected e-mails and other data streamed through those hot spots. It now collects much of that data and traffic information, through customers’ phones.

Mobile advertising could be a $2.5 billion market by 2015, according to Frost & Sullivan, and ads tied to a location are much more lucrative than other ads. But Mr. Morgan said the location data could be valuable in areas beyond the Internet and mobile phones.

For example, a retailer that has eight outlets in a city could use data about walking patterns to determine where to open its next outlet.

“You are basically getting insight into human behavior that we’ve never had before,” Mr. Morgan said.

Jenna Wortham contributed reporting from New York.