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Instant Analysis: Microsoft Corporation Acquisition Gives Skype a Lift

By Tim Brugger - Jan 15, 2016 at 1:45PM

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The cloud king is taking steps to jump-start use of its video conferencing solution for businesses.

In an effort to enhance its Skype video conferencing service, Microsoft (MSFT 0.71%) recently announced a couple of enhancements, one of which came via acquisition. To help meet its objective of giving Skype users an "enterprise communications management experience," Microsoft has acquired several back-end reporting, management, and analytics technologies from Australian-based Event Zero. Financial terms were not disclosed.

The recently acquired tools from Event Zero are designed to improve Skype's diagnostic and reporting capabilities, along with more comprehensive analytics. And Microsoft didn't stop there.

For international video and audio conferencing, Microsoft has now rolled out its Skype Translator to all Windows customers using the service. Skype Translator was first introduced about a year ago and offers users an instant means of translating conferencing audio into seven languages: Chinese Mandarin, English, French, German, Italian, Portuguese, and Spanish. The new update has built the translation feature directly into Skype, rather than require a separate app for users to download.

Does it matter?
Overall, video conferencing is expected to reach about $8 billion in the next seven years. However, when combined with audio and the associated communications tools Skype and its competitors like Cisco's (CSCO -0.22%) suite of unified communication (UC) products offer, the opportunity is already significantly larger. The recent enhancements to Skype, specifically for enterprise customers, should help Microsoft distance itself from UC industry big hitter Cisco, and all the other alternatives.

To put Microsoft's Skype for Business adoption into perspective, after making it available to enterprises via its flagship Office 365 integration last summer, over 4,000 new enterprise customers were immediately onboard. And initially, that figure was growing at an astounding 20% a week.

Just a few quarter's back, Cisco led the pack with 16% market share, with Microsoft nipping at its heels with just shy of 14%. But with the popularity of Skype, even before its recent improvements, Microsoft is sure to knock Cisco from the top spot sooner rather than later.

What makes Skype's recent enhancements and growing popularity even more intriguing is its ancillary impact on Microsoft's other key businesses, particularly the cloud. As more companies and users become Skype customers -- via the cloud -- Microsoft CEO Satya Nadella's cloud-first pillar of his two-pronged strategy will almost certainly reap the benefits.

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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