Microsoft & Skype: the great cosmic joke … and an $8.5B investment in yesterday

It has become increasingly clear to me over the past few weeks that Microsoft has made an astonishingly bad decision in buying Skype. But that’s that the worst part.

The worst part is that it is now completely obvious that the top people at Microsoft, Steve Balmer among them, have no clue about the future of technology.

Here’s the deal: all value is moving to the cloud.

Look at the top valued companies today. Google. Facebook. All the hot new startups that are building value. Zynga. LinkedIn.

They are cloud companies.

They live in the cloud. They take us into the cloud. They work on the cloud. They make the cloud meaningful.

And what about Apple? Apple, which is now trending toward a more than 2X valuation over Microsoft?

Don’t they make a lot of stuff? Things? Devices.

The answer is yes, of course. But first of all, those devices are on-ramps to the cloud. No-one has made the cloud relevant to average people (who don’t have a clue what the cloud is) than Apple. Mobile apps virtually didn’t exist before iPhone. Mobile data is dominated by iOS (and now Android). iPad is a perfect vehicle for cruising the virtual road.

Value started in hardware (IBM etc)
Value moved to software (Microsoft etc)
Value is now moving to the cloud (web 2.0 and 3.0 companies)

The cloud is not magical. It includes hardware. And it includes software. Of course. But it is the opposite of installable software.

One guess what Skype is …

Buying Skype is a great business decision … in terms of technology, in terms of clients, in terms of integration into core products.

But all of these tactical reasons that say YES are vastly outweighed by the massive strategic reason that says that Skype, even though it’s P2P, even though it has added a small cloud-ish component via Facebook … is fundamentally old-fashioned software.

Which makes Microsoft’s $8.5 billion dollars an investment in yesterday. Which follows so many of their other recent investment decisions. Which signals yet another death-knell (did you need one more) for Microsoft’s domination in the world of technology.

Microsoft, quite simply, is v2.0.

The world is moving forward 3.0 is upon us. Google+ is showing the way. 4.0 will come. And a company that is optimized for surviving and thriving in a 2.0 world is de-optimized for surviving in a 3.0 world.

It’s raining in Seattle.


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