What should Microsoft do with Skype?

The recently announced purchase of Skype by Microsoft wasn’t something I would have anticipated at all – but it actually does makes sense.

Aside from blocking some of its competitors from making the same purchase, this has some interesting strategic implications. In recent years, Microsoft’s profit has come from two places – games (i.e. XBox), which is what the consumer notices, and the enterprise market (which it dominates).

Look for Microsoft to do three things (aside from increasing advertising) to fully utilize this purchase:

1) Expand Skype’s enterprise functionality – Skype has some teleconferencing capabilities, but they could definitely be improved (I can think of several competing products that are superior in this area). In addition, better integrating this functionality into the Outlook / Exchange / Sharepoint stack could be very beneficial for corporate customers. This might imply that they eventually kill off some of their in-house software, i.e. Live.

2) Improve Skype’s APIs – allowing games to use embedded voice and video chat via APIs could be a powerful enhancement for the XBox platform.

3) Bring back Skype for Windows Mobile (which also makes sense vis-a-vis Microsoft’s alliance with Nokia).

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