We don’t believe Microsoft’s MSFT $8.5 billion acquisition of Skype will significantly alter the firm’s credit quality and, as such, we don’t plan to change our AAA rating. While the deal comes at a steep price–more than 30 times Skype’s adjusted 2010 EBITDA–this is more of a concern to equity investors. Microsoft has generated more than $19 billion in free cash flow during the first three quarters of fiscal 2011. Even after returning $14 billion to shareholders via dividends and buybacks, net cash has increased to $38 billion from $31 billion at the end of fiscal 2010, with gross cash sitting at $50 billion. Further, the company is paying for Skype with overseas cash, which avoids a repatriation tax hit.

The reduction in cash on the books has little impact on our credit rating model. Prior to the deal, we had expected Microsoft to generate enough cash to meet its obligations roughly 17 times over during the next five years. Removing the $8.5 billion it will pay for Skype, without any incremental cash flow the firm will provide, takes that ratio down only modestly to about 16 times.

We don’t plan to change our Business Risk assessment of Microsoft as a result of the Skype acquisition, as we believe the deal makes strategic sense. Microsoft hopes to leverage Skype’s peer-to-peer communication technology prowess to enhance the value proposition of its business and consumer collaboration products and services. Some compelling services that could emerge include video conferencing via Kinect, video chat on Windows Phone devices, PCs, or tablets (similar to Apple’s AAPL FaceTime service) and usage of Microsoft’s Lync and Skype to communicate with users external to enterprise customers’ organizations. That said, we would get concerned if Microsoft’s management made a habit of overpaying for acquisitions on a regular basis.

Source:http://torontostar.morningstar.ca/globalhome/industry/news.asp?articleid=380952

A flaw in Skype for Android could let criminals harvest private information from smartphones, including the user’s name and email address, contacts and chat logs, the Internet calling software maker confirmed Friday.

One security researcher called it “sloppy coding” and a “disrespect for your privacy.”

Last week, Justin Case, a regular contributor to the Android Police blog, disclosed that Skype on Android does not block access to a number of sensitive data files stored on the handset.

The files contain a wealth of information about the Skype account and the smartphone’s owner, ranging from full name and date of birth to alternate phone numbers and account balance. Also accessible, said Case, are instant chat logs and all Skype contacts.

“Skype mistakenly left these files with improper permissions, allowing anyone or any app to read them,” said Case. “Not only are they accessible, but [they're] completely unencrypted.”

Case created an Android application that demonstrated retrieving the unsecured data, and warned that hackers could do the same.

“A rogue developer could modify an existing application with code from our proof of concept, distribute that application on the [Android] Market, and just watch as all that private user information pours in,” Case said.

Case’s concern is well-founded. Last month Google yanked more than 50 malware-infected apps from its Android Market, while three weeks ago Czech security company AVAST said a different rogue designed to shame software pirates sent personal information to the maker of the “Walk and Text” app.

On Friday, Skype acknowledged what it called a “privacy vulnerability” in its Android client. Although it promised to address the problem, it did not spell out a timetable.

“We are working quickly to protect you from this vulnerability, including securing the file permissions on the Skype for Android application,” said Adrian Asher, Skype’s chief information security officer, in an entry on a company blog.

As of late Sunday, the Skype app for Android had not been updated.

Asher also urged users “to take care in selecting which applications to download and install” on their smartphones.

Chet Wisniewski, a security researcher at Sophos, didn’t think much of that advice.

“How you would implement that advice is difficult to know, as an application wishing to steal your Skype information doesn’t require special permissions,” Wisniewski said in a Sunday blog.

Instead, Wisniewski said the safest move by Android users would be to delete Skype from their smartphones.

Wisniewski argued that the flaw Case uncovered was not really a vulnerability, disconcerting as it was. “This could simply be written up as sloppy coding at best, or disrespect for your privacy at worst,” he said. “[But it] makes one wonder about the Skype for iOS application. Is it safer in Apple’s App Store?”

The separate Skype Mobile on Verizon app is not affected by the privacy snafu, said Case.

Source:http://www.computerworld.com/s/article/9215887/Skype_for_Android_leaks_user_data

Skype’s outage last week is was caused by a bug in an older version of its software, used by more than half of its users, that overloaded its servers.

Lars Rabbe, Skype’s chief information officer, said on the Internet calling company’s blog that its “Skype for Windows client (version 5.0.0152)” servers crashed last Wednesday and Thursday after a group of servers responsible for offline messaging became overloaded.

Newer versions of Skype’s software, such as version 5.0.0.156, and older versions of Skype were not affected by the initial problem, Rabbe said.

But because so many Skype users had version 5.0.0152, the server crashes caused about 25% to 30% of the company’s “supernode” computers — which serve as connection points in its network — to fail. That caused users of other versions to fall victim to the outage as well, he said.

Skype has released a software update for version 5.0.0152 in an effort to keep such an outage from happening again.

“We are learning the lessons we can from this incident and reviewing our processes and procedures, looking in particular for ways in which we can detect problems more quickly to potentially avoid such outages altogether, and ways to recover the system more rapidly after a failure,” Rabbe said.

The blog post ended with an apology to customers — which comes after the decision to reimburse paying Skype users affected in the outage.

“We know how much you rely on Skype, and we know that we fell short in both fulfilling your expectations and communicating with you during this incident,” Rabbe said. “Lessons will be learned and we will use this as an opportunity to identify and introduce areas of improvement to our software, further assess and invest in capacity and stability, and develop better processes for outage recovery and communications to our user base.”

Source:http://latimesblogs.latimes.com/technology/2010/12/skype-outage-windows.html