Facebook Video Chat: How Do Microsoft Investors Feel About Skype Acquisition Now?

Jul. 6.11 | About: Microsoft Corporation (MSFT)

A major announcement today was released by Facebook which presented a new video chat feature available within the Facebook interface. The video chat feature is powered by Skype and is a very important development.

Video chat has been around for years but most people still do not use it. I'm very tech savvy myself but for some reason have yet to integrate video chat into my daily life. Video chat now available easily for 750 million Facebook users worldwide is indeed a game-changer.

When the Skype acquisition was announced by Microsoft (NASDAQ:MSFT), you were hard pressed to find an analyst or investor who praised the move. It seems that people made judgments on the acquisition based only upon the lack of success of previous acquisitions. Or maybe it was that they just didn't like Steve Ballmer because the stock has been stagnant for a decade.

The reality is that the Skype move was brilliant for many reasons. We're not even going to discuss the integration possibilities with everything from mobile phone to xbox to desktop software (which are all great opportunities), but we're going to focus on Microsoft's most important partner: Facebook.

Investors have been quick to criticize Microsoft for missing on big ideas like the tablet and search. They've gotten their bell rung by Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL), everyone likes to say. Yet, who is one of the most strategic partners of Facebook? Microsoft.

You could say that Microsoft knew that competing with Facebook was a waste of time (something Google might want to learn), and instead bought a stake of the company in order to further solidify future joint opportunities.

One huge opportunity which I just discussed here at Seeking Alpha is the Bing + Facebook deal. As I explain, I think it represents the best competition to Google that exists in the search arena.

You can be assured that the Facebook + Skype partnership has been in the works for some time and that this was a major part of the acquisition strategy of Skype. Now Microsoft leapfrogs Google in this area big time.

People have scoffed at the purchase price of Skype just like they scoffed at the valuation that corresponded to the small investment Microsoft made in Facebook years ago. Now that Facebook is reportedly worth many times that valuation, nobody has given Microsoft credit for the move. Don't get me wrong, the capital gains on the small investment aren't the story, but rather the positioning it gives Mr. Softy with regard to being a major Facebook partner. Will the Skype purchase price look like a bargain years from now with regard to the further positioning that Microsoft will gain as a result of the Facebook video chat move? I believe it's possible.

Might it be time to give Ballmer and his team credit for how he has maneuvered Microsoft's relationship with Facebook? I believe it is.

Disclosure: I am long MSFT.