Microsoft Corp to acquire Skype SA for $8.5 billion | business | Hindustan Times
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Microsoft Corp to acquire Skype SA for $8.5 billion

Microsoft Corp said on Tuesday that it has agreed to buy popular Internet telephone service Skype SA for $8.5 billion in the biggest deal in the software maker’s 36-year history. A killer app for the net

business Updated: May 11, 2011 02:10 IST

Microsoft Corp said on Tuesday that it has agreed to buy 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 programme 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% of the user base, pay to use Skype services.http://www.hindustantimes.com/Images/HTEditImages/Images/11_05_biz1.jpg

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 (IPO) 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 of 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 Steve 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 in the online search market. Microsoft had made a $47.5-billion bid to buy Yahoo three years ago, but withdrew the offer after Yahoo balked. Yahoo is now worth about half of what Microsoft offered.