After talk arose this week about potential suitors for Skype, the popular (but debt-ridden) voice and video communications service, the news arrived that Microsoft would be acquiring the company for a whopping $8.5 billion, all cash. This happens to be the largest transaction ever for the fading software giant.

That Microsoft’s stock price dipped after this deal was announced clearly indicates the financial community regards the transaction as overpriced, and perhaps not making a whole lot of sense. But CEO Steve Ballmer is, typically, bullish on the prospects. Then again, how many people listen to Ballmer these days?

Typical of the skepticism is this comment from the people at Ars Technica: “Integrating with Xbox, Kinect, and Windows Phone is the sum total of the plan that Microsoft put in the press release. At the press conference there was also some non-specific talk about advertising. But that’s it. That’s Microsoft’s grand vision for its $8.5 billion purchase. Adding voice and video chat to its games console and phone platform and maybe showing a few ads.”

In short: “Why Skype?”

Now Skype, founded in 2003, has had an adventurous existence. It was founded by Niklas Zennstrom and Janus Friis, whose previous venture was a peer-to-peer download service of questionable legality, Kazaa. Just two years later, eBay got ahold of Skype, somehow imagining that people who participated in online auctions would use the service to talk to each other prior to making a transaction. Fat chance!

The synergies were questionable, so just four years later, eBay finally found their exit strategy from this misguided venture, as a majority stake in Skype was sold to a private investment company that included the original founders. So you can bet that the deal with Microsoft means one huge payday for Skype’s owners.

Forgetting the arcane issues of money, contracts, and all the rest, I’m sure most of you realize that Skype has been something less than a money maker. In 2010, the company recorded revenue of $820, which isn’t too shabby, but not an awful lot for when you consider that the service has hundreds of millions of users, but only a little over eight million actually pay for anything. The reason is that most of you run Skype to make free voice and video calls to other Skype users.

This isn’t to say everyone gets free service. Skype does offer cheap calls to traditional phones, and you can even set up a Skype telephone number to receive them. It’s actually quite a good deal, and the situation is even better when you install Skype on an iPhone or other smartphone. Suddenly you can talk to people in other countries without paying the huge ransom exacted by the traditional wireless providers.

Indeed, Skype doesn’t even have to host all that traffic. Using technology that builds upon their history as a file sharing service, Skype actually uses the computer of the person who hosts the connection to handle the bandwidth requirements. Yes, Skype has a pretty large worldwide server infrastructure too, with hundreds of employees managing the system. It even works pretty well most of the time, though truth to tell, connection quality can be flaky regardless of the speed and reliability of your broadband connection. It can become particularly troublesome when you host a group audio or video chat.

Regular listeners to our shows know that Skype can be problematic. But you can’t argue with the price.

Certainly, if Microsoft does well by the Skype acquisition, this will be a good thing for everyone. While I realize some of you would prefer to avoid Microsoft at all costs, if they build good products and services, there’s no harm in using them.

These days, in fact, it does appear that Google’s dominance of search and other businesses has targeted them as the potential most hated tech company on the planet, if they’re not there already.

Now I realize there are many pitfalls in this transaction. Microsoft has had problems with the companies that they hane acquired. Key executives depart, and quality goes down the tubes. The one positive note is that Skype CEO Tony Bates will become President of the Microsoft Skype division, and that he’ll report directly to Ballmer. He won’t have to deal with revolving vice presidents in order to manage strategy. But all this assumes that Ballmer will listen, and that he and Bates are on the same page as to how the two companies will be integrated.

As far as non-Microsoft operating systems are concerned, Ballmer is assuring us that they will continue to be supported. It’s also true that the latest Skype, version 5.x, actually comes much closer in look and feel to the Windows version, which is actually not a good thing. And, by the way, a recent software update fixed a serious security problem that only impacted the Mac. But if MicroSkype continues to build comparable apps for all supported platforms, there will be little reason to complain, assuming they make an honest effort to improve connection, voice and video quality, not to mention security.

The other huge question is pricing. Will greedy Microsoft decide to jack up the rates in order to build profit potential? Perhaps, but that would come at the risk of losing customers. Skype isn’t the only cheap Internet phone service out there, and I wouldn’t be surprised to see Apple considering support for traditional telephone connections in iChat and/or FaceTime in a future release. If Apple chooses to go that route, though, they’d probably have to build versions for Windows too, perhaps even Linux, in order to lure more potential Mac customers their way.

If Skype suffers from this acquisition, however, I’ll be extremely disappointed. But it’ll take time to determine the fallout. Meantime, I will be looking for other options — just in case.

In 2005, Apple announced a mostly unexpected processor transition, from PowerPC to Intel. This decision wasn’t made lightly, or because Intel had a better sales team, or because Steve Jobs was friendly with Intel’s CEO. The real reason was that the PowerPC had become to be a dead-end for Apple. The highly touted G5 was a bear to cool, and a note-book version was, as a result, an impossible dream.

The transition was made easier by the fact that Mac OS X was designed at the outset to be portable, easily moved to different processor families, although developer issues were not so simple. Indeed, for years Apple had quietly built and updated an Intel version of Mac OS X, reportedly code-named “Star Trek,” even while Steve Jobs was boasting about his satisfaction with the PowerPC roadmap.

The transition was a nonissue for most Mac users. The PowerBook became the MacBook, in its various forms, and the Power Mac G5 begat a Mac Pro. The once and only iMac was still an iMac; ditto for the Mac mini.

From the outside, none of these updated products looked that much different. Prices were essentially the same, but the innards were quite different. More to the point, performance, which lagged behind the standard Windows PC, finally reached parity, simply because the hardware was near-identical beyond Apple’s usual customizations.

From a developer standpoint, it was a bit harder, since applications had to be rebuilt to support the new chip architecture. As they did in the early days of Mac OS X, Apple devised a way to run your older apps in a sort of emulation layer, which they called Rosetta. Apps built in Apple’s Xcode environment were allegedly relatively easy to transition to Universal, meaning they supported both PowerPC and Intel. But lots of fine tuning was necessary to make the applications shine in their new clothing.

That was then, this is now. It’s a given that Apple usually gets an early chance to use the latest and greatest Intel hardware, even though they won’t use the infamous “Intel Inside” logo in their ads or product packaging. Intel’s product roadmap is well known, and it does appear that they will continue to develop smaller, more powerful chips, which also consume less power.

But Intel hasn’t done so well in the mobile space, where ARM processors in all their forms rule the roost. Apple has a leg up here, after buying two custom chip design companies so they could put their own special tweaks on an ARM processor. The results are the A4 and the A5, the latter a dual-core chip that’s probably equivalent in performance to a Power Mac G4 of early 21st century vintage. But it’s sure snappy on an iPad 2.

That takes us to this curious rumor that has Apple doing another processor transition, to ARM.

Now any talk of Apple switching note-books and perhaps desktops to ARM doesn’t seem sensible in light of the well known performance disparity. The latest rumors have it that there will be a genuine 64-bit ARM chip come 2014, which would make such a transition feasible. But at what cost? Yes, maybe ARM uses less power, but there’s nothing to indicate that the performance of even the cheaper Intel chips will be matched; not even close.

Even if there was relative performance parity, and I grant Apple could use the lessons learned with the iOS to build Mac OS X for ARM, consider the cost of the transition for the developer community. Even if Apple builds a convenient ARM/Intel Universal updater in Xcode, it will take time to optimize apps for the new architecture. There will also have to be another compatibility option, to allow you to use the old apps, which means that high-energy products such as Photoshop will run much slower until Adobe gets around to building a new version.

This means a potential two-year delay before the fruits of the transition, such as they are, are fully realized, and the negatives become a non-issue.

So why would Apple consider such a questionable move? To unify its OS development better? To take advantage of improved power management? And there’s nothing to indicate that Intel isn’t taking improved power management seriously.

Of course, this doesn’t mean that there won’t be future ARM-related developments that will make the chips far fore powerful, without sacrificing power utilization. Maybe the rumor mongers or Apple know about such things, and are thus hedging their bets against future roadblocks in the Intel camp.

Now it is perfectly true that Apple builds far more ARM gear than Intel gear these days. More and more people are likely to consider a tablet, particularly the iPad, which may become their only PC in the next few years. It may even be possible for Apple to consider building perhaps a MacBook Air with ARM chips, if they become powerful enough. But a wholesale transition just doesn’t make a lick of sense, at least for the next few years. Regardless of where the ARM makers go, Intel won’t be standing still. They do not like being placed second when companies consider mobile processors, and they surely have the resources and cash to fund the needed development to make their components more competitive.

Besides, there’s always AMD, which produces x86 compatible chips, in case they can deliver better parts.

I suppose it’s also possible for Apple to consider using Intel’s state-of-the-art factories to build ARM-style chips. Maybe Intel wouldn’t make as much money assembling someone else’s hardware, but some profits are usually better than none at all.

There’s have been several published reports suggesting that Apple might use the Mac App Store as the main method to distribute Mac OS X Lion. What this would mean is that, upon ordering the upgrade, it would download to your Mac and show up in the Dock. To install, you’d just click on the Installer icon, and follow the usual steps from then and there.

All well and good. It would make it far easier for many Mac users to get ahold of their Lion upgrades without having to rush to an Apple Store or order a copy online. But you have to assume the upgrade will be several gigabytes in size, thus requiring a lengthy download. This can become particularly irksome if your Internet access is, shall we say, bandwidth challenged.

But the stories also suggest that Apple is not going to stop offering Lion on physical media. That would be no different from previous OS releases, and you can take your choice which method suits you best.

Of course, if you wanted a backup of a digital download, nothing would stop you from making a perfectly legal backup on a DVD, in case something went awry with your Mac’s hard drive. And don’t forget Time Machine and other methods of protecting yourself from lost data.

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You could see it this past quarter, when Apple, for the first time, posted higher profits than Microsoft; total sales were already ahead. I could almost imagine Steve Jobs and his crew applauding and cheering when Microsoft’s financials were originally announced. It was a long time coming.

Apple’s ascendency was most obvious last year when the company’s market cap exceeded that of Microsoft. Whereas Apple’s stock is, overall, rising, Microsoft’s has been flat for years. Fewer and fewer investors have confidence in the long-term prospects, although Microsoft continues to make profits that most companies would envy.

The problem is that Microsoft CEO Steve Ballmer doesn’t seem to have a grasp of the fact that innovation means inventing something new and different, rather than poorly imitate what has gone before. This lack of inspiration from the executive suite may, in part, explain why Windows Phone 7, though it has a really nice interface, seems to be a couple of years behind when it comes to features. Microsoft must still believe they’re stuck in the 1990s, where the mere vaporware promise to beat or exceed the competition some day is sufficient to keep customers calling.

These days, if there’s any chance of a replay of a two-party operating system war in the mobile space, it’s between Apple and Google, and Microsoft may have a seat at the table, but probably a small one. Perhaps their last great hope is that long-term alliance with Nokia, where Windows Phone 7 will replace the existing Symbian-based OS on the company’s smartphones come next year. Meantime, Apple earns more than Nokia on handsets, with a fraction of the market share. Worse, telling customers that existing Nokia gear is already obsolete doesn’t help the company make much progress this year on the high end.

And it’s not that Microsoft’s promotional campaigns seem terribly compelling. Although Windows 7 is doing well enough in a stagnant PC market, a large portion of the new sales involve OEM bundles, meaning the OS is preloaded onto a new PC. It’s not that Microsoft’s lame ads are causing loads of people to rush into their local consumer electronics outlet to buy a costly retail upgrade.

The Bing campaign, to boost Microsoft’s search engine, is curious in its own right. The message is not simple and direct, as in any Apple ad you can mention in recent memory. Worse, the lame attempt at humor falls flat. Besides, what’s so compelling about a free search engine anyway? How many TV ads has Google run lately, or in your memory, yet Google’s search share remains fairly consistent. Bing’s gains came by cannibalizing Yahoo! search which is, as you recall, now powered by Bing.

That Bing is now an option on a Mac with Safari might help, at least for those who care to try a different search engine, or regard Google as the “evil empire,” Microsoft’s former role. But most customers don’t really care a whit about changing search engine options. Google works fine. Bing might have prettier background images, but I am not at all convinced the search results are superior, let alone comparable.

Where is the message that Bing conveys that would make you want to switch? Other than, as I said, encouraging people who can’t tolerate Google, which doesn’t really demonstrate a provable advantage for Microsoft, or even a sensible marketing strategy.

While Microsoft seems to be doing OK is on the game machine front — and they will likely prosper from the backlash in light of Sony’s recent Playstation online debacle — on the long haul the biggest competition is that old nemesis, Apple, with the iPhone, iPod touch, and the iPad.

And when it comes to tablets, whenever there’s talk of a potential iPad competitor, new Android OS devices get first priority. Then there’s the curious case of the RIM BlackBerry PlayBook, which still must be bridged with a regular BlackBerry to use an email client, not to mention RIM’s pair of CEOs who cannot voice a coherent vision for the company. It’s no wonder RIM’s growth curve has flattened, and the PlayBook was greeted by collective yawns.

Nowhere do we hear much about an impending Microsoft tablet solution. Sure, maybe Windows 8 will have support for ARM chips, the ones used on other tablets. But supporting a set of mobile processors doesn’t mean that Microsoft has a grasp on how to tailor the classic Windows interface to work best on a mobile device with a touchscreen or tiny physical keyboard. As I said, Windows Phone 7 isn’t bad, actually. Aside from the missing features, there aren’t a whole lot of apps available yet. There’s also a report that Microsoft is actually trying to lure iOS developers to the platform, because they aren’t coming of their own accord.

Now if Microsoft fails to adapt to the 21st century, it doesn’t mean that sales will suddenly plummet. There’s enough momentum there to keep Microsoft’s stockholders — and their wealthy executives — fat and rich for a number of years. But the trend, as I’ve previously said, remains inexorable. It’s going to be downhill, and the slide will be slow and treacherous.