Money Matters - Simplified

Microsoft acquires Skype for $8.5B in cash

Apparently in an attempt to catch up with Apple and Google, Microsoft has acquired the online telephony and video conferencing company for twice its recent valuation.

In a landmark deal, Microsoft Corp. has acquired internet phone company Skype Technologies SA, reps for both the companies announced Tuesday. Placing its biggest bet yet, the Redmond software giant paid $8.5 billion in cash to buy VoIP provider Skype Global.

Rumors were rampant recently that Skype was in the sights of search engine mammoth Google and Facebook--a popular online social network site, as an acquisition target.

Microsoft acquires Skype
Eventually, the once-dominant software company Microsoft appeared as a prime bidder for Skype, which has 663 million people across the world registered to use its voice-over-internet-protocol (VoIP) communications.

A once cutting-edge technology company, Microsoft, confirmed Tuesday it had "entered a definitive agreement" to acquire VoIP provider Skype Global for $8.5 billion in cash.

Apparently in an attempt to catch up with Apple and Google, Microsoft has acquired the online telephony and video conferencing company for twice its recent valuation.

Rumors were rampant recently that Skype was in the sights of search engine mammoth Google and Facebook--a popular online social network site, as an acquisition target.

Skype acquisition is the expensive ever
Microsoft's acquisition of Skype is also the company’s biggest bet in its 36-year history, edging out its $6 billion purchase of online advertising company aQuantive in 2007.

Under the deal, Skype will run as a separate business inside Microsoft, dubbed Microsoft Skype. Skype chief executive Tony Bates will become president of the new division and report directly to Microsoft's chief executive, Steve Ballmer.

"Skype is a phenomenal service that is loved by millions of people around the world. Together we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world," Ballmer said of their acquisition of Skype.

Microsoft has already been offering three other VoIPs, via MSN Messenger, Xbox Live and Lync, used in its Office division.

Microsoft plans big with Skype
While announcing the all-cash deal during a news conference in San Francisco, Ballmer also outlined the company’s plans to bring the technology to a wider audience of consumers and business customers.

The software giant is planning to add Skype support to its popular Xbox and Kinect gaming devices and Windows Phone mobile operating system, and connect Skype users with its own Lync, Outlook e-mail program, and Xbox Live communications services.

"By bringing together the best of Microsoft and the best of Skype, we will empower people around the world with new technologies that should bring them closer together," Ballmer said.

About Skype
Headquartered in Luxembourg, Skype was founded by Niklas Zennstrom and Janus Friis and was bought by eBay in 2005. That company then sold a majority stake of Skype to an investment consortium including its founders and Silver Lake in 2009.

Skype offers free voice and video communications over the internet, a popular alternative to standard telephone calls, especially over long distances.

According to the company, it has more than 660 million registered members worldwide, including 107 million who use the service at least once a month, using the service regularly for calls and chats for more than 207 billion minutes of voice and video conversations.