Microsoft Acquires Skype for $8.5 Billion

Windows Live Skype Microsoft Acquires Skype for $8.5 Billion

This morning, Microsoft and Skype announced that the software giant will be acquiring the popular audio/video service for $8.5 billion. Rumors of the deal surfaced on Sunday evening and grew into a frenzy last night. Shockingly, the rumors were true.

According to the official press release, the acquisition will “increase the accessibility of real-time video and video communications.” Rather than fold Skype into one of Microsoft’s existing products, like Windows Live Messenger or Lync, Skype will become a new business division within Microsoft. The current Skype CEO, Tony Bates, will remain in a leadership role as president of the Microsoft Skype Division. He will report directly to Microsoft CEO Steve Ballmer, cutting out much of the bureaucracy.

Skype’s 170 million active users (663 million registered users) and highly regarded voice and video chat capabilities will greatly augment Microsoft’s already impressive offering. The service will be integrated with Microsoft’s existing technologies, while remaining on competing platforms.

Skype will support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices, and Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities. Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms.

The details of the arrangement are still being revealed, and the actual date of the acquisition is unknown. It will, however, go through. The boards of both companies have already approved the arrangement and entered into a definitive agreement.

Skype, until this announcement, was preparing to go public. The company was purchased by eBay in 2005. A few years later, eBay gave a group of investors 70% of the company. According to All Things Digital, Skype’s current debt stands $696 million. This sounds like a significant amount until it is compared to the most recent losses incurred by Microsoft’s Online Services division. Microsoft, however, isn’t afraid to invest in a technology. They know that you have to spend money to make money. Microsoft approched Skype with an unsolicited offer in early April, and the rest is history.

Rumors also placed Google and Facebook as potential buyers for Skype. LiveSide believes the deal might be as much about the technology as keeping Skype from Facebook and Google. I’m inclined to agree.

With Skype as a division of Microsoft, Windows Phone will most likely become the premiere mobile client. Microsoft, at MIX 2011, announced that Skype would be coming to Windows Phone this Fall with the Mango update. They were supposedly going to demo the app, but switched to a simple image at the last second.

Microsoft will continue to support Skype on competing platforms. But the majority of their efforts will probably be focused on Microsoft technologies like Windows Phone, Kinect, and Windows. Kinect currently integrates with Windows Live Messenger, allowing users to video chat with friends and family from the comfort of their couch. Enabling Skype connectivity will only enhance Video Kinect. At the press conference, however, Steve Ballmer reiterated that an important aspect of Skype’s value proposition is its availability on all platforms. Thi

The deal, while surprising at first, makes sense. eBay has wanted to get rid of Skype for a while. What better company to sell it to than Microsoft? Microsoft can absorb Skype’s losses while improving the technology and expanding its reach. With Skype in Microsoft’s stable, who knows what they’ll be able to do with Windows Phone. They could even build it into the core operating system, similar to Windows Live Messenger in Mango. Skype’s acquisition by Microsoft is filled with potential.

Source: Microsoft PressPass

1 Comment

Allen Schmidt on May 10, 2011 5:01 PM

It’ll be their version of Facetime, which suddenly became popular not long ago for some unknown reason.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>