Microsoft - The Other Guy

Microsoft buys Skype

Little more than a decade after the dotcom bubble burst, the internet business is once again partying like it is 1999. The frenzy of deal-making in Silicon Valley, which is turning social media entrepreneurs into multibillionaires, moved up another notch when Microsoft splashed out $8.5bn for the loss-making internet telephone service Skype.

Tuesday's buy is a record for the software giant and takes the total value of worldwide tech-related deals so far this year to $85.5bn (£52bn) – the strongest spell since the months before the dotcom bubble burst on 10 March 2000.

Analysts said the deal would give Microsoft a boost in its increasingly bitter battle with Apple and Google. Skype boasts about 170 million users every month and is adding 600,000 a day. But most calls are free and the service has struggled to make a profit. Last year it lost $7m.

Steve Ballmer, Microsoft's chief executive, said that with Microsoft's backing Skype would be able to build a future where "talking to friends and colleagues around the world will be as seamless as talking to them across a kitchen table or a conference room".

Buying Skype gives Microsoft a recognised brand name on the internet at a time when Google and Apple are both building up their internet phone and video services. "Google has Google Voice, Apple is building up Facetime, Skype is a great brand," said Colin Gillis, an internet analyst at New York-based BGC Partners.

Gillis said Microsoft was likely to add Skype to its Xbox video games system, Office software and its mobile and tablet software. "Skype addresses some major holes for Microsoft," he said. "If they don't screw it up."

Skype was founded in 2003 by Swedish tech entrepreneur Niklas Zennström and the Dane Janus Friis. The service has grown far beyond its techie roots and is already a mainstream product. The retail giant WalMart started selling Skype hardware in 2007. At peak times there are more than 23 million Skype users online.

This is the second time it has been sold to a big tech firm. In 2005 eBay, the online auction company, bought it for $2.5bn. But eBay struggled to integrate Skype and argued with its founders and management, eventually selling it for $2.75bn to a private equity investor, Silver Lake, in 2009 but keeping a 30% stake.

Friis and Zennström also backed the sale as part of a consortium that bought 14% of Skype. Just a year and a half later eBay has made its money back and the founders are sharing a $1.2bn payday. The Skype deal ranks as the biggest in Microsoft's 36-year history and follows multibillion-dollar strategic purchases by other tech giants including Intel, which bought the virus software specialist McAfee, and Hewlett Packard, which bought the handheld devices firm Palm.

Investors are also fighting over the new generation of tech firms including Facebook, Groupon and Twitter. Google is believed to have made multibillion-dollar offers for both Groupon and Twitter.

Private investors have fought to get a stake in Facebook, which is lining up a share sale next year that could value the firm at more than $70bn.

A Window Into The 7th Wonder?

Installation

The installation process took over an hour, but once up and running Windows 7’s advantages were impressive. Gathering information from 168,941 user files, settings and “programs” was time consuming for the automated installer, and so was expanding 2340mb worth of files. Google’s new Chrome browser installs in seconds, and while that is not an operating system, Microsoft will be aware that everybody’s impatient for their computers to be faster in all respects. However, at least the process was clearly saying what it was doing, and made it obvious that it hadn’t in fact crashed midway through.

Homegroups and touchscreens

Essentially, this is the operating system Vista should have been – it starts up relatively quickly, drivers already exist to make peripherals such as scanners and printers work with it, and it does clever things that XP, the version of Windows most people still use, just doesn’t.

The two facets that are at the heart of that are based around the “Homegroup”, and new ways of inputting and viewing information. The Homegroup means that you can group together a number of things, from MP3 players to other computers, and so as soon as you join a network, you can instantly see everything you’ve seen before. Music, films and files really are available immediately. This idea is certainly not new, but the breakthrough comes in simplifying the sharing process to accommodate the countless videos, digital pictures and albums that people have taken using digital technology. Windows Media Player, too, now supports far more file formats.

The new ways of dealing with information, meanwhile, mean that touchscreens are much better supported – in the future they will need to be – and that forthcoming applications based around combining television and the internet will slot in neatly, too. The same integration applies to online services such as social networking site Facebook, and, for instance, Windows Live with its shared picture galleries.

The icons here are bigger, too, but they don’t look patronising. The idea is that fat fingers should be as useful as the tiny pointer of a mouse. Shaking individual windows can be used to activate certain features, as well, which could be a natural move with a finger on a touchscreen, but not with the mouse.

Vista’s desktop, improved

On many machines, Vista’s desktop quickly seemed to run slowly. Software updates fixed some issues, but at least three computers I’ve used didn’t seem to respond very effectively. Vista separates its gadgets out from the bar that previously occupied the right-hand side of the screen, and consequently feels considerably more friendly. The difference isn’t huge, aesthetically, but functionally it’s significant.

From netbooks to desktops

Another crucial improvement for Windows 7 over Windows Vista is that 7 will run on a range of machines, from low-specification netbooks to high-powered desktops. On our mid-range Studio Hybrid, 7 was certainly more impressive than Vista, although there were the bugs that are acceptable in a test beta version, especially to do with the anti-virus programmes that are currently still very specific to Vista.

Micorosoft say that the operating system will be happy on, for instance, an Asus EeePC. Given that the EeePC sometimes struggles to run its cut-down version of Linux, that’s quite some claim, and I’d be eager to see how true it really is.

Intelligent power management

There are substantial improvements in power management, too, with ports being turned off when they’re not in use, and so this is an operating system that does what it should: unlike Vista, it shuts up, and keeps things going while you, the user, can get on with whatever it is you need to be doing. Batteries will live longer, but the programme learns from your behaviour too. If the display is set to dim after 30 seconds and you move the mouse immediately it does, then you’ll get significantly longer before the computer dims its display again. So there’s time, say, to read something quite lengthy on screen without constant irritation.

But should you really go and download a beta?

Senior people at Microsoft say they’ve been using the current build of Windows 7 on their main machines for a few days now and that there have been no problems. Indeed, it is certainly true that the developer community is making surprisingly positive noises about Windows 7, especially when compared to Vista. So people will be taking the plunge in droves, right?

Geeks will, indeed. But does Windows 7 do anything you need so much it’s worth the risk? The answer is almost certainly no.

It offers impressive connectivity, it looks slick to the (Apple?) core, but, for instance, persuading it to ignore warnings about McAfee’s Security Centre being incompatible with this new version of Windows was difficult and annoying. For some unknown reason, too, web access sometimes just ground to a halt and crashed Internet Explorer. No computer or wifi network is perfect, but a consumer should be able to know that such problems are not in their browser, and with a beta you simply don’t have that kind of certainty.

Conclusions

Microsoft has learnt a lot from Vista. The PR for Windows 7 is already better, and the company, more than in the past, is keen to constantly remind users that Friday’s release is only of a test version. It helps, of course, that in truth Vista is now the operating system it should have been when it launched. People aren’t desperate for an upgrade, as they were in the last days of XP.

What Microsoft has realised primarily, though, is that Windows 7 needs to make everything easier – playing music, joining networks, sharing photos should all feel simpler than they do currently. The good news is that with this beta they already do; if Microsoft can really deliver on that vision in the full release, then Windows 7 should be a formidable programme indeed.