Microsoft to Buy Skype for $8.5 Billion

SkypeMicrosoft Corp. (MSFT) said Tuesday that it has agreed to buy the popular Internet telephone service Skype SA for $8.5 billion in the biggest deal in the software maker's 36-year history.

Buying Skype would give Microsoft a potentially valuable communications tool as it tries to become a bigger force on the Internet and in the increasingly important smartphone market.

Microsoft said it will marry Skype's functions to its Xbox game console, Outlook email program and Windows smartphones. The company said it will continue to support Skype on other software platforms.

The sellers include eBay Inc. and private equity firms Silver Lake and Andreessen Horowitz.

About 170 million people log in to Skype's services every month, though not all of them make calls. Skype users made 207 billion minutes of voice and video calls last year.

Most people use Skype's free calling services, which has made it difficult for the service to make money since entrepreneurs Niklas Zennstrom and Janus Friis started the company in 2003. An average of about 8.8 million customers per month, or just over 1 percent of the user base, pay to use Skype services.

Skype lost $7 million on revenue of $860 million last year, according to papers that the company has filed since announcing its intentions last summer to launch an initial public offering of stock. The IPO was later put on hold. Skype's long-term debt, net of cash, was $543,883 at the end of 2010.

The Skype takeover tops Microsoft's biggest previous acquisition - a $6 billion purchase of the online ad service aQuantive in 2007.

Microsoft said Skype will become a new business division headed by Skype CEO Tony Bates, who will report directly to Ballmer.

Although it makes billions from its computer software, Microsoft has been accustomed to losing money on the Internet in a mostly futile attempt to catch up to Google Inc. in the lucrative online search market. Microsoft got so desperate that it made a $47.5 billion bid to buy Yahoo Inc. three years ago, but withdrew the offer after Yahoo balked. Yahoo is now worth about half of what Microsoft offered.

Microsoft would be Skype's second large-company owner. EBay bought Skype for $2.6 billion in 2005, but its attempt to unite the phone service with its online shopping bazaar never worked out. It wound up selling a 70 percent stake in Skype to a group of investors led by private equity firms Silver Lake and Andreessen Horowitz for $2 billion 18 months ago.

Besides eBay, Silver Lake and Andreessen Horowitz, Skype's other major shareholders are Joltid and Canada Pension Plan Investment Board.

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Not Again

I just got a $829.99 iPad2 for $98.37 and my girlfriend snagged an awesome $1299 MacBook Air for only $137.93, its being delivered tomorrow. I would be a fool to keep paying high retail prices at places like Walmart or BestBuy, when I even sold a 37" HDTV to my boss for $600 that I only paid $78.24 for. I use two sites, both are good, SnagBids.com
and BidsGo.com

May 17 2011 at 10:04 AM Report abuse rate up rate down Reply
jagrocholski

How menny job will be lost if Microsoft buys Spy, i think we should brake up the very large companys, to create more jobs and better service. We are wasting to much raw materials, and lowering are quality. If we down size the big companys, there will be less waste At the rate we are going we will run out gargage dumps.

May 11 2011 at 6:03 AM Report abuse rate up rate down Reply
ireyl42

remmember rich people you die like a worm,...only rich become rich now.. not like before rich become poor and poor become rich. but now no more bec. our country is almost to become communist. look they CUT EVERYTHING from GOV. NEXT TIME THEY CUT YOU HEAD....

May 11 2011 at 12:13 AM Report abuse rate up rate down Reply
ireyl42

THIS IS THE STYLE OF COMMUNISM THEY CONTROL EVERY THING, OUR NATION IS ALMOST GOING TO BECOME A COMMUNIST CONTROL EVERYTHING. WOW.. WHAT A COUNTRY IS THIS NOW..

May 11 2011 at 12:04 AM Report abuse rate up rate down Reply
lvpilot

It was so nice to be able to talk to my family and not pay ma bells fare...$2.70 per min... vs $.19 on Skype. Microsoft is becoming just like our
Govt...Can't stand for someone getting or using a computer without getting its pound of flesh. How dare we get something at a resonable price.. Skype was great for travelers Now MICROFT will ruin it for all.

May 10 2011 at 9:31 PM Report abuse rate up rate down Reply
1 reply to lvpilot's comment
bggdg

There are enough Skype clones that Microsoft won't raise prices. Instead, their objective is likely based on the opportunity to integrate Skype into existing products/services like Windows Mobile or Lync. Integration into their mobile platform would actually drive down prices for consumers due to the ability to replace the fees wireless service providers currently charge for their buckets of voice minutes with a free or low cost Skype alternative.

May 10 2011 at 10:44 PM Report abuse rate up rate down Reply
zekandzora

HOW DO YOU DESTROY A NATION ????

Give a privately owned, tax exempt, foreign owned, for profit, unconstitutional, fraudulent { it's very name is a fraud }, corporation a monopoly on the printing of YOUR money and then let them lend you back YOUR money at what ever interest rate they chose to charge you. Let there NEVER be a real audit or any real governmental oversight of the monopoly. Allow the employees of the money printing monopoly to gain key positions in the government like for instance The Secretary of the Treasury { sounds like Timmy Geitner to me }. Allow the money printing monopoly and it's multinational satellite corporations to pay-off, bribe, blackmail, influence, threaten and manipulate the key members of all branches of government to support the money monopolies agendas even if it destroys the host nation. We are the host nation and the parasites that are ******* us dry are all aligned with The Federal Reserve which is NOT federal and has NO reserves. It is the unconstitutional money printing monopoly that is INTENTIONALLY destroying our once great and free country.

May 10 2011 at 9:31 PM Report abuse rate up rate down Reply
Linda

Don't know if I'll be using skype that much anymore.....

May 10 2011 at 8:12 PM Report abuse rate up rate down Reply
pm0501

You can count on free or low cost phone calls going away very soon. That $8.5 billion didn't just fall off a tree!

May 10 2011 at 3:22 PM Report abuse rate up rate down Reply
World Peace News

worldpeacenews.com

May 10 2011 at 12:03 PM Report abuse rate up rate down Reply
bbbaker558

Check out StockTouchDown.com. They are talking about a new VoIP product that Skype is trying to buy out!!!!!!!!!!!!

May 10 2011 at 11:24 AM Report abuse rate up rate down Reply