Skype Acquisition Misunderstood or Wall Street Just Plain Hates Steve Balmer

Wall Street often reminds me of a teenager.  Prone to having crushes and a bit full of itself. 

This week, I was perplexed by Wall Street’s reaction to Microsoft’s acquisition of Skype.  I would have expected a blast of anti-trust concerns, instead Wall Street just smirked.

But then again, Wall Street is irrational.  It often can’t see beyond its self-image and perceive what is really going on outside of Manhattan.  

Right now, Wall Street loves Apple.  I can remember a time when Apple and Steve Jobs were considered the biggest losers.  Microsoft was the master of the universe. 

Today, I think Wall Street just plain hates Steve Balmer (the way it hated Carly Fiorina)  — misses the love of its life, Bill Gates, Warren Buffet’s best buddy.  

Everything that Steve does is wrong.  If he buys Skype for $8.5 billion he is a fool wasting money on the ‘grandparents video conferencing with their grandchildren’ segment.  Henry Blodget of dot.com bubble infamy summed up the party line with the sage advice that MSFT should have "returned the money to shareholders".

Henry, this is a company that has returned $83 billion to shareholders over the past ten years only to see its stock price decline.  Do you really think that another $8.5 billion would have changed your feelings toward Steve?

At the risk of being a contrarian, I think that the Skype acquisition is brillant.  To me, Microsoft has always been the dominant ‘small and medium business’ software company.  It has bested all comers:  IBM, Word Perfect, Apple, Sage, and Google.  It dominates the IT environments of millions of small and medium size companies all over the world  — the backbone of the global economy — and it is growing while all its competitors are in decline — HP with Unix, Oracle with Sun, IBM with the AS/400 or whatever they call it now, Linux, Google and Apple can’t even get started with SMB’s.  Recent IDC and Gartner data show that its dominance is growing in this largest section of the IT market, not diminishing.  It controls the email, office automation, document sharing and  sales force management segments that drive small and medium businesses.  If the anti-trust regulators had let it buy Quickbooks in the mid-1980′s,  then it would have had a true monopoly.

Apparently, unbeknownst to Wall Street, an enormous number of SMB’s rely on SKYPE to do their business, especially ‘globalized SMB’s’.  For example, today I used it to video conference with the Ukraine, Romania, Tennessee, Maine, New Rochelle, Germany, Italy and Dubai.  All for free.  Imagine if SKYPE and Bing were integrated into Outlook.  Then I would never leave the Microsoft eco-system.  Everything would be in one spot at my fingertips under the control of the infamous Steve Balmer. 

I will admit that Steve is a hard man to love, but eventually Wall Street will wake up and see that cash is gushing out of MSFT and hook up with the company on the rebound from its current Apple crush .  But this will only happen after its realizes that Microsoft has bought the global VOIP monopoly (or it is the predecessor of Starnet.)

 

Disclosure:  I have a substantial position in MSFT, so I have put my money where my mouth is.