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#1 2011-05-10 11:06:43

Steel
Member
Registered: 2008-02-16
Posts: 2521

Skype

Microsoft buys Skype for $8.5 billion.

One of the main investors that will be getting a very large payday..... Canada Pension Plan Investments.

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#2 2011-05-24 09:12:47

scooter
Administrator
Registered: 2007-12-19
Posts: 247

Re: Skype

This seems way overvalued in my opinion.  Skype in its current form operates at a loss.  Is any of the technology proprietary?  Are there patents involved?  Bill Gates is often good at articulating a vision for future growth in certain industries but this seems way too rich at least on a projected cash flow basis.

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#3 2011-05-24 16:04:46

Steel
Member
Registered: 2008-02-16
Posts: 2521

Re: Skype

Scoots....it is 10x earnings so in line with current tech sales. We have looked at a number of reasons for the purchase but one sticks out....mobile version of Skype and a jump start against Google and other platforms. Skype afterall already is well over 500 million subscribers and the majority are prime to become skype mobile users...couple that with windows mobile and you have a built in market

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#4 2011-05-25 09:36:41

scooter
Administrator
Registered: 2007-12-19
Posts: 247

Re: Skype

I think it's 10x revenues (around $800 million in revenue) but the earnings multiple will be much higher than this (I think they actually operated at a loss this year).  I think it's definitely a good strategic fit for Microsoft and the growth of Skype might eventually justify the price...but it's a big "might" in my opinion.

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#5 2011-05-25 16:00:14

Steel
Member
Registered: 2008-02-16
Posts: 2521

Re: Skype

scooter wrote:

I think it's 10x revenues (around $800 million in revenue) but the earnings multiple will be much higher than this (I think they actually operated at a loss this year).  I think it's definitely a good strategic fit for Microsoft and the growth of Skype might eventually justify the price...but it's a big "might" in my opinion.

Scoots...sorry I mistyped....I meant 10x revenues.....and yes that is typical right now in the industry. Whether a company is in the black or not is not an issue.

We have track a dozened or so companies within our space in the tech field (skype would be one) and their sale to third parties over the last year and virtually all have sold at 10x revenues or better and if memory serves...only 2 were in the black.

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#6 2011-05-26 09:37:44

scooter
Administrator
Registered: 2007-12-19
Posts: 247

Re: Skype

Yeah, it's not a crazy multiple by any stretch and Microsoft does have the means to make it an effective takeover.  The recent Linkedin and Facebook deals would have multiples several times greater than that so in that respect, maybe this will end up being a good deal for them.

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