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Bill George

Harvard Business School Professor, former Medtronic CEO

Ballmer Thinks Long-term with Skype Acquisition

I was on CNBC today with Yale’s Jeff Sonnenfeld commenting on Microsoft’s purchase of Skype. While the interviewers took a short-term view of stock price movements, Jeff and I believe it is an important deal for Microsoft, as Skype has myriad revenue-producing opportunities for growth in the video-conferencing. We use it all the time to stay in touch with our grandchildren in Munich and San Francisco – we’re one of 663 million users. But its potential on the business side is far greater as transmission quality improves and Skype can offer multi-point capability. The latter will be critical for the expansion of small, personal groups, which we call True North Groups (the title of my new book, to be released on September 1, 2011) which want to operate remotely.

Steve Ballmer is doing just the right thing here. I hope this will be the first of many smaller ventures Microsoft acquires. They came close with Facebook three years – for $15 billion – and should pursue “the next great thing(s)” coming in the tech space. Most people don’t recognize that Microsoft has grown from $28 billion when Ballmer took over to $62 billion in 2010, in large part due to internally-created businesses in servers, X-Box and Bing that now account for 40% of its revenues. With $36 billion in cash, Microsoft has plenty of capacity to make a lot of bets on future growth engines. Even if some don’t make it – which they won’t – they may hit on the next Facebook, Google or YouTube.