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Microsoft Buys Skype

Steve Ballmer acquires VoIP empire for $8.5 billion.

By: Omer Shachnai
Published: May 10th, 2011 in Business » World
Microsoft pays big bucks for Skype.Pic: NILL

After rumours that first Facebook, then Microsoft were about to acquire Skype, the latter confirmed it is purchasing the Voice Over Internet Protocol (VoIP) company Skype, for US$8.5-billion in cash. It is the biggest deal Microsoft has made since buying aQuantive, an advertising company, for $6-billion in 2007.

As a result, Skype will operate as a division in Microsoft and Skype’s CEO, Tony Bates, will run the division and report directly to Ballmer. Skype will be integrated into Microsoft systems and products including Windows Phone 7, Outlook, Messenger, Kinect, X-Box Live, Hotmail and Lync- which is exciting news, especially for gamers. In addition, Microsoft says it will continue to support and develop Skype for the non-Microsoft platforms as well.

Not only is it the largest price Microsoft paid in the last few years, Skype is not yet profitable. According to reports filed with the SEC, the company lost $6.9-million last year and carries almost $690-million in debt.

However, Skype is still a very attractive acquisition with a user base of 663 million, about 150 million of whom use the application monthly. In addition, almost 9 million users are paying customers.

Skype’s investors, a group which includes Silver Lake, Index Ventures, Andreessen Horowitz and the Canada Pension Plan (CPP) Investment Board, bought 70% of Skype from eBay for $2.75 billion in September 2009. Thus, the deal represents a huge exit for them.

Finally, with both the boards of Microsoft and Skype approving the deal, only regulatory approval is now required to finalize the deal.

Related articles: Microsoft, Skype, Steve Ballmer, VOIP
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