Skype and Microsoft During May Essay

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Recently, Skype also created a platform for group video, where groups of more than two people could meet with Skype. The company was founded in 2003, with its headquarters in Luxembourg. It is available for free download. Microsoft was founded in 1975 and has since become the world leader in software, services, and solutions for businesses and individual people. It is expected that the acquisition would help both companies to expand their services for the benefit of customers, while also benefiting themselves by expanding their reach across the world.

The potential success of the acquisition depends on a number of uncertainties. The change to cloud-based computing, for example, could result in increased competition. Microsoft's business model may need to change. The company may also face challenges when protecting its property rights or when others claim that Microsoft has violated their property rights.

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Microsoft could also have security vulnerabilities that could result in a reduction of its revenue.

Skype's revenue for 2010 was $860 million, with a loss of $7 million. Its long-term debt was $686 million. This debt is included with the $8.5 billion that Microsoft would pay for Skype. This means that there would be a 32.0x multiple on 2010 adjusted EBITDA. If one assumes a 30% increase in adjusted EBITDA from 2010 to 2011, the projection is 25.0x for 2011. This number is based upon Skype's user base, which grew by 40% from 2009 to 2010, with its revenue that increased by 20%, and adjusted EBITDA by 40%.

Although some critics believe that Microsoft's investment in Skype is too high, both companies believe that the deal will create more benefits than losses for.....

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