Microsoft buys Skype for $8.5bn in its biggest-ever takeover deal

Sale marks Skype’s third takeover in its eight-year history


Software giant Microsoft is due to announce an $8.5bn takeover of internet company Skype at a press conference later this afternoon.

The deal, which has been ratified by the boards of both companies, will see Microsoft assume control of Skype from a team of investors led by private equity firms Silver Lake. Once the merger is complete, Skype will become a new business division within Microsoft, and chief executive Tony Bates will assume the title of president of the Microsoft Skype Division, reporting directly to Microsoft chief executive Steve Ballmer.

Plans are also in place to add Skype’s video communication functionality to Microsoft’s flagship gaming devices, Xbox and Kinect, and to its Windows software such as Lync and Outlook.

Bates said that the new deal will enable the company to “accelerate Skype’s plans to extend our global community and introduce new ways for everyone to communicate and collaborate”.

The Microsoft deal will be Skype’s third takeover in its eight-year history.

Founded by Niklas Zennström and Janus Friis in 2003, Skype  was first purchased by eBay for $2.6bn in 2005, but the online auction company decided to sell to the Silver Lake-led investment group four years later after attempts at integration failed.

Rumours concerning the sale of Skype have been circulating for weeks, with Google, Facebook and Cisco said to be interested in a partnership deal before Microsoft launched its takeover.

Fred Huet, managing director of Greenwich Consulting, an international telecoms and media consultancy, has called the acquisition a “bold move” and told Growing Business that “the deal raises several issues for Microsoft, including if it has overpaid for Skype and how it will turn the Skype service into profit.”

Huet added: “It is exciting to think about potential technology integration between Microsoft Windows platform and Skype services but this will undoubtedly raise competition concerns and Microsoft will have to see in detail how to integrate this into its mobile offering and the its deal with Nokia.”

Meanwhile, Martin McNulty the former head of strategy and planning at Skype and current chief executive of digital agency, Forward3D, told Growing Business that “Skype today is a very different creature to Skype of old”.

However, McNulty added that “Skype still remains the most elegant of the VOIP/IM solutions on the market and it’s firmly entrenched within small business and start ups and the default low-cost coms platform, so it will at least afford Microsoft some much needed “cool””.

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