Responses are trickling in to Microsoft’s (MSFT) announcement this morning it will buy Internet phone calling firm Skypefor $8.5 billion.
The conference call with Steve Ballmer and Skype executives starts in just a little bit, at 11 am, Eastern, so there’s likely to be more response later today after analysts’ have had a chance to ask some questions and digest the whole thing.
I would note that Nokia (NOK), Microsoft’s partner in smartphones, is beating the market this morning on no particular news, perhaps a reaction to Nokia’s now having another arrow in its quiver given its partnership with Microsoft for phone software. Nokia shares are up 20 cents, or 2.4%, at $8.61.
Sandeep Aggarwal with Caris & Co., who rates Microsoft stock a Buy, writing early this morning before the formal announcement, thinks “an acquisition of Skype by Microsoft makes sense, given how important “communication” and “mobile” are for Microsoft.” The $8.5 billion price tag implies a 25 times multiple of enterprise value to Ebitda, “which is somewhat rich.” It also would imply $2 per share in proceeds to eBay (EBAY), he calculates, given the latter’s 30% stake in Skype.
Aggarwal sees Microsoft working Skype into its “Lync” server for businesses and maybe putting it into Office. There’s lots of ways to enhance Windows Live for consumers and also add to its Windows Phone 7 operating system.
Collins Stewart analyst Kevin Buttigieg, who also has a Buy on Microsoft, this morning writes that this “isn’t the kind of transformative deal investors may have liked to see Microsoft do with $8.5 billion.”
“Skype is a large deal at a relatively expensive price that doesn’t transform any MSFT business quickly or in a way which improves perception about its ability to compete in a post-PC world.”
It will require “solid execution,” he writes, which is not something Microsoft is known for, he writes. The deal appears to be neutral to Microsoft’s non-GAAP EPS.
Is this a hidden plus? Buttigieg points out that as Skype is incorporated in Luxembourg, which means that Microsoft can use some of its international cash, which is 80% of its cash balance, for the deal.
The conference call with Steve Ballmer and Skype executives starts in just a little bit, at 11 am, Eastern, so there’s likely to be more response later today after analysts’ have had a chance to ask some questions and digest the whole thing.
I would note that Nokia (NOK), Microsoft’s partner in smartphones, is beating the market this morning on no particular news, perhaps a reaction to Nokia’s now having another arrow in its quiver given its partnership with Microsoft for phone software. Nokia shares are up 20 cents, or 2.4%, at $8.61.
Sandeep Aggarwal with Caris & Co., who rates Microsoft stock a Buy, writing early this morning before the formal announcement, thinks “an acquisition of Skype by Microsoft makes sense, given how important “communication” and “mobile” are for Microsoft.” The $8.5 billion price tag implies a 25 times multiple of enterprise value to Ebitda, “which is somewhat rich.” It also would imply $2 per share in proceeds to eBay (EBAY), he calculates, given the latter’s 30% stake in Skype.
Aggarwal sees Microsoft working Skype into its “Lync” server for businesses and maybe putting it into Office. There’s lots of ways to enhance Windows Live for consumers and also add to its Windows Phone 7 operating system.
Collins Stewart analyst Kevin Buttigieg, who also has a Buy on Microsoft, this morning writes that this “isn’t the kind of transformative deal investors may have liked to see Microsoft do with $8.5 billion.”
“Skype is a large deal at a relatively expensive price that doesn’t transform any MSFT business quickly or in a way which improves perception about its ability to compete in a post-PC world.”
Is this a hidden plus? Buttigieg points out that as Skype is incorporated in Luxembourg, which means that Microsoft can use some of its international cash, which is 80% of its cash balance, for the deal.
