An interesting article on how an analyst thinks Microsoft can make money on Skype.
the analyst says it will be possible for Microsoft to make a penny a share off display ads on Skype on 2010 – by my calculation that works out to about 84 million in 2012. Lets assume Skype breaks even in 2012, which seems reasonable (they lost money in 2010 and forecast to lose/breakeven in 2011).
Microsoft is paying 8.5 billion to get 84 million in 2012, up to 500 million in 5 years according to the analyst. Most people agree Microsoft didnt buy Skype for the technology or the earnings – they bought it for the eyeballs of Skype users and to keep those eyeballs away from Google or Facebook.
Berkshire Hathaway just paid 9.5 billion for Lubrizol, and Lubrizol is forecast to make 800 million to 1 billion in earnings in 2011 with earnings growth of 8 percent a year. No strategic reason for Berkshire to buy Lubrizol, other than it makes a bunch of money year after year.
Linked In just went public at at huge premiums to earnings – perhaps making Skype look reasonably priced. Looking at the price difference between Lubrizol and Skype/Linked in – its apparent we are in an internet bubble. Unfortunately, Microsoft is in the unenviable position of having to buy technology at these inflated prices.