TR Editors' blog

What Does Microsoft Want With Skype?

Microsoft pays $8.5 billion for the Internet phone service--will it gets its money's worth.

Erica Naone 05/10/2011

In a deal that has some experts scratching their heads, Microsoft announced today that it's acquiring Skype for $8.5 billion.

Reuters' Bill Rigby writes that, while Skype's technology was groundbreaking at its height and is still quite valuable, it's hard to see how Microsoft will manage to get its money's worth:

Microsoft is hoping that more business users would be willing to pay for Skype if it is integrated with Outlook e-mail, which hundreds of millions of people already use, or that more gamers will pay to join the Xbox Live network if real-time video and voice services are added.

It should also allow its new Windows Phones to compete directly with Apple Inc and Google Inc smartphones, which already feature video chat.

But some investors carped that Microsoft already had the technology to do this, or should have developed it itself, and may soon be overtaken.

Peter Bright in Ars Technica writes that Microsoft certainly has technology it could have developed into the features it's hoping to get from Skype:

Microsoft's own software already has considerable overlap with Skype. Windows Live Messenger offers free instant messaging, and voice and video chat. It currently boasts around 330 million active users each month, typically with around 40 million online at any one moment. Microsoft has an equivalent corporate-oriented system, Lync 2010 (formerly Office Communication Server) that allows companies to create private networks that combine the communications capabilities of Live Messenger with corporate manageability. The underlying technology of both platforms is common, allowing interoperability between Live Messenger and Lync. The company also plans to integrate Kinect into Lync to create more natural virtual presences.

Even considering Skype's paying users, Bright writes, Microsoft still seems to have paid too much.

USA Today quotes IDC analyst Al Hilwa offering some explanation for the high price that Microsoft paid:

"If Skype ended up in the hands of Google, it might have been able to use it to strengthen its ecosystem at the expense of Microsoft," says Hilwa.

But keeping Skype out of the hands of Google,may have furthered a different company's agenda, says Om Malik of GigaOm:

The biggest winner of this deal could actually be Facebook. The Palo Alto, Calif.-based social networking giant had little or no chance of buying Skype. Had it been public, it would have been a different story. With Microsoft, it gets the best of both worlds: It gets access to Skype assets (Microsoft is an investor in Facebook) and it gets to keep Skype away from Google.

Facebook needs Skype badly. Among other things, it needs to use Skype's peer-to-peer network to offer video and voice services to the users of Facebook Chat. If the company had to use conventional methods and offer voice and video service to its 600 million plus customers, the cost and overhead of operating the infrastructure would be prohibitive.

Malik adds that Facebook could also help Skype garner more users and revenue.

Apple Snaps Up Intelligent Assistant Startup

But the AI project that spawned Siri will be used to create other companies.

Erica Naone 04/29/2010

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Apple has snapped up Siri, which makes an "intelligent assistant" application for mobile devices. The startup company's software can perform all sorts of useful tasks based on simple voice or text commands. The iPhone version can, for example, be used to find upcoming local events, make reservations at a restaurant, or check the weather.

Now that Apple has acquired the company, it's unlikely that we'll see a version released for Android, or other phone platforms. But Norman Winarsky, who is on Siri's Board of Directors, says the research project that spawned Siri will soon be the foundation of another startup company.

Winarsky was involved with the technology behind Siri since before the company existed. He is the vice president of ventures, licensing, and strategic programs for the non-profit R&D institute SRI International, which is responsible for CALO—a hugely ambitious artificial-intelligence research effort. CALO is the source of Siri's core technology—specifically Siri's ability to understand, classify, and respond to user requests. Kittlaus helped to shape this technology into a product. Winarsky recruited Siri CEO Dag Kittlaus to be an entrepreneur-in-residence at SRI, when there was interest in finding ways to commercialize technology from SRI's CALO Project.

But sophisticated as Siri is, it only scratches the surface of the technology developed through CALO, Winarsky says. SRI starts two to three ventures a year (with technology selected from about 2000 research projects), and Winarsky says that another CALO-based startup should be spun out in about six months from now. Though he couldn't give details, Winarsky says, "It also comes out of this concept of the virtual personal approach to information. In this case, it won't be an assistant, it'll be a personalized service that uses CALO technology."

Winarsky also noted that more startups will come out of SRI in the "reasoning and dialogue space."

Siri is perhaps remarkable in that it works largely as advertised. The idea of a virtual personal assistant was made infamous by Apple's Knowledge Navigator concept video from the 1980s, which envisioned a level of intelligence that was ludicrously unattainable at the time (the personal assistant has always been about 10 years away, Winarsky jokes). When Siri was seeking venture funding, he says, the company was constantly asked to explain what had changed to make a personal assistant a real possibility. He says Siri is only possible thanks to a series of advancements: "A perfect storm of computational power, bandwidth, mobile communications, Web services, AI, and natural language," he says.

To him, Apple's acquisition of Siri is just another sign that the technology's time has finally arrived. He expects that similar technology will enter the health market, shopping, and in sales teams trying to access information from databases.

"You're going to see virtual personal assistants on all devices," Winarsky says. "SRI has no monopoly on this. And so, smart phones, PCs, servers, call centers that have intelligent assistants--you'll see it everywhere, in every medium and vehicle there is."

Apple Expected to Acquire Siri

It's unlikely we'll see versions of the voice-controlled "intelligent assistant" for non-Apple devices.

Erica Naone 04/29/2010

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Reports are surfacing that Apple has acquired Siri, a sophisticated mobile personal assistant application built on artificial intelligence research done at SRI as part of the CALO project.

What's always impressed me about Siri is that in my own tests of the product, it's lived up to the hype. Siri's founders are serious technologists who've been careful to promise only what they can deliver, and the results show clearly in how slick and finished the app felt at launch.

In 2009, we named Siri to our list of 10 important emerging technologies of the year. The acquisition would suggest that the company's technology is going to get the resources and support it needs to spread widely.

It's a shame, however, to think that Siri for Android is now an unlikely prospect.

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