Microsoft Buys Skype For $8.5 Billion

by Gavin O'Malley, May 10, 2011, 11:21 AM

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Disrupting the respective plans of Google and Facebook, Microsoft has agreed to acquire Skype for a staggering $8.5 billion.

Less than 24 hours before the deal was announced Tuesday morning, reports were swirling that Facebook and Google were each courting the VoIP service. Rumored acquisition prices, however, did not exceed $4 billion.

Microsoft CEO Steve Ballmer on Tuesday said the addition of Skype would greatly enhance the company's existing portfolio of real-time communications products and services, while fostering new business and revenue opportunities.

In 2010, Skype boasted 170 million connected users and more than 207 billion minutes of voice and video conversations.

"Together, we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world," Ballmer said Tuesday.

Skype will support Microsoft devices, like Xbox and Kinect, Windows Phone and a wide array of Windows devices. 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.

As of Tuesday morning, Microsoft and Skype said the deal had already been approved by their respective boards of directors. Skype will become a new business division within Microsoft, and Skype CEO Tony Bates will assume the title of president of the Microsoft Skype Division, reporting directly to Ballmer.

While the deal will likely impact the consumer market a great deal, how it will affect the enterprise market is less certain.

"The announcement that Microsoft will buy Skype should give UC vendors like Avaya, Mitel, Polycom, NEC and others some cause-for-pause," said Steve Hilton, an analyst at Analysys Mason. "However, enterprises aren't just going to jump on the Micro-Skype express ... Skype, while having some nice communications features, is still a consumer-grade solution."

Founded in 2003, Skype was acquired by eBay in September 2005, and then acquired by an investment group led by Silver Lake in November 2009.

Speaking on behalf of the investor group that sold Skype to Microsoft, Egon Durban, managing director of Silver Lake, said: "We are thrilled with Skype's transformation during the period of our ownership and grateful for the extraordinary commitment of its management team and employees."

Skype reportedly made solid progress over the past 18 months under Silver Lake's leadership, increasing monthly calling minutes by 150%, developing new revenue streams and strategic partnerships, acquiring the intellectual property powering its peer-to-peer network, and recruiting an outstanding senior management team.

Other members of the selling investor group led by Silver Lake include eBay International AG, CPP Investment Board, Joltid Limited in partnership with Europlay Capital Advisors; and Andreessen Horowitz.

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0 comments on "Microsoft Buys Skype For $8.5 Billion".

1. Christophe Maire from Systemax
   

   commented on: May 11, 2011 at 9:46 a.m.

   Will Skype ever generate $8.5B? Doubtfull

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