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Microsoft Corp. (MSFT)

Microsoft to Acquire Skype Press Conference Call

May 10, 2011 11:00 AM EST


Frank Shaw – Head of Communications

Steve Ballmer – CEO

Tony Bates – CEO, Skype Global S.à r.l

Peter Klein – CFO


Ryan Lawler – GigaOm

Michael Kaplan [ph] – Fortune


Frank Shaw

Good morning. I’m Frank Shaw, Head of Communications for Microsoft. Thanks for coming by today. We heard there wasn’t much going on today, so wanted to make sure you had some news to cover. In just a minute, Microsoft CEO, Steve Ballmer and Skype CEO, Tony Bates will talk about our news from earlier this morning, and then I’ll moderate a short Q&A.

Just a reminder no flash photography and please limit photos to the first few minutes of the presentation.

Now for the fun stuff. During this conference we will be making statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call and in the Risk Factors section of our Form 10-K, Form 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements.

Now, please welcome Steve Ballmer and Tony Bates.

Steve Ballmer

Thanks. Thanks everybody for coming today. It’s a real pleasure to have a chance, Tony will be up in a minute, we thought we'd have a chance first to greet you together.

Today is a big day for Microsoft, and Skype, as well as consumers and businesses around the world. By bringing together the best of Microsoft, and the best of Skype, we will empower people around the world with new technologies that should bring them closer together. In a sense, if that sounds familiar, it's because it's at the core of who we are at Microsoft. We create technology that makes life better for billions of people, and millions of companies around the globe. We're making life better by providing tools that help people to learn, to analyze, to take action, as well as to enjoy, and to socialize.

At Microsoft, we're doing this through a number of products, products like our Office product, which enables users to consume information, to create and to communicate; Bing, which moves beyond serving up lists of information and tries to help people analyze the information, and actually make decisions and take action; Xbox, Xbox LIVE, and Kinect, creating tools for an enjoyable and social experience in the living room and online.

Communications, though, is perhaps the most fundamental area in which technology can be transformative. Communications is changing rapidly, and there are plenty of opportunities ahead. We'll move beyond email and text to rich experiences in the future, talking to friends and colleagues around the world will be as seamless as talking to them across a kitchen table or a conference room.

We dream about building experiences that aren't limited by distance or device. We dream about how to build experiences where people can enjoy and connect with the people and groups of people most important to them in the ways that are most natural. Think about everyday experiences, and how they can become more connected, like attending a college lecture, joining a PTA meeting, preserving memories from a family reunion, or simply having meetings with groups of colleagues. All of these experiences will be enhanced with online technology to make them richer and better, whether you're there in person, or you need to participate remotely.

At Microsoft, we see enormous opportunity that brings together what people want -- data, voice, video, IM, all on a single screen -- whether it's a smart phone, a PC, a slate, or the TV. Microsoft and Skype together will define this future and what it really, really looks like. Anytime, I would say, people around the planet talk about communications, they talk about Skype. The Skype brand has become a verb, nearly synonymous with video and voice communications. Clearly, Skype has built an innovative product with global scale, and the number of Skype users is rapidly accelerating, which really was exciting to me. There are 170 million connected Skype users, growth of 40 percent year over year. That number is growing by 600,000 new registrations every day.

And these are very engaged users. Skype users use over 207 billion calling minutes in 2010 alone. In February Skype had about 30 million concurrent users on the service, which is really phenomenal. I had a Skype yesterday with Tony Bates, and I happened to notice there were 25 million concurrent users at the time, just to give you kind of a sense.

These users love the video chat capability and it's exploding. It now represents more than 40 percent of all Skype use.

With that kind of growth engagement, Skype has developed multiple revenue streams, and overall revenue has grown 20 percent year-over-year, and I think represents a very significant go-forward opportunity. In case it's not clear, I'm excited about the Skype business. Microsoft has a strong history with Skype. We're familiar with them, based upon the Skype client work on Windows, and we've been talking for a while about other important partnership opportunities, including partnering in the advertising area.

Based on Skype's great market position and innovative technology though, it became clear to use that we had the opportunity to do even more together as a single company in a way that would be innovative and beneficial to customers, as well as both companies. So, we made an unsolicited offer to acquire Skype, to Silver Lake. We finalized price in mid-April, and we signed the deal last night.

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