Wall Street Pans Microsoft's (MSFT) Skype Deal

Wall Street is neutral-to-negative on Microsoft's (Nasdaq: MSFT) deal to acquire Skype for $8.5 billion, the largest takeover in its history. Many see the price tag at 9x Skype's revenue as being too much for a company that has had execution issues in the page.

Investors are voting with their feet Tuesday, sending the stock down 1.5 percent in intra-day action.

A number of Wall Street analysts have weighed-in on the deal. Below is a summary of a few comments:

• Collins Stewart analyst Kevin Buttigieg stated that this "isn't the kind of transformative deal investors may have liked to see MSFT do with $8.5 billion and requires solid execution MSFT isn't known for to realize the breadth of potential benefits." He did note however that Microsoft will be able to leverage its international cash balances since Skype is incorporated in Luxembourg. The firm maintains a Buy rating.
  
  
• Gleacher & Co.'s Yun Kim believes the true value within Skype is its 145mil+ users, including its 8.8mil paying users. "We believe Skype customers will likely be introduced to various MSFT products and potentially boost many of MSFT's businesses. We see an immediate opportunity for MSFT to introduce its search engine, Bing, to the Skype platform. We also see tighter integration of Skype and its smartphone platform, Windows Phone 7, which could boost adoption of its fledging mobile platform. Furthermore, Skype technology can add additional value to MSFT's current enterprise offering and its Xbox franchise." Kim doesn't see much downside risk to the acquisition given the current valuation of the company. The firm maintains a Buy rating.

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