A Very Un-Buffett-Like Acquisition

The Microsoft acquisition of Skype, in which Microsoft reportedly outbid the supposedly free-spending folks at Google by 100%, may prove an act of exquisite genius.

But we have our doubts.

Compare the $8.5 billion Microsoft is spending for Skype’s $860 million of 2010 revenue (and negative income) with the $10 billion Warren Buffett is spending for Lubrizol’s $5.4 billion of 2010 revenue (and three-quarter-billion income), and then ask yourself “Which has a better shot at paying off?”

Of course, one of the arguments in favor of the Skype deal–synergies and users and eyeballs aside–is that Microsoft gets a chance to use some of its offshore cash to buy the Luxembourg-based telephony business. In a sense, it’s “free money,” say the admirers…which is always a dangerous way to justify a deal. (Just ask the AOL shareholders who paid for Time-Warner with inflated AOL stock…)

Indeed, as big and splashy as this deal seems, we’ll bet dollars to donuts the write-off will be just as big and splashy.

In the meantime, we’re working on an update here from the Berkshire shareholder meeting, now that the dust has settled.

Whether we get it out before the Skype write-off is a bet we wouldn’t take.

JM