Microsoft nabs Skype

Company finalises $8.5 bn deal to acquire the internet phone company

Tags: Mergers and acquisitionsMicrosoft CorporationSkype
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Microsoft nabs Skype Microsoft has purchased Skype for $8.5bn.
By  Georgina Enzer Published  May 10, 2011

Microsoft has entered into a definitive agreement to acquire Skype for $8.5 bn in cash. The boards of directors for both companies have approved the acquisition.

Microsoft purchased the VoIP company from the investor group led by Silver Lake.

According to Microsoft, Skype currently has 170 million connected users and handled 207 billion minutes of voice and video conversations during 2010. The company hopes the acquisition will generate new revenues for Microsoft and enhance its existing VoIP communications and services.

Microsoft has already invested in real-time communications platforms such as Lync, Outlook, Messenger, Hotmail and Xbox LIVE and the company will now connect Skype users to Lync, Outlook, Xbox Live and other Microsoft communities.

Skype will also support Microsoft devices such as Xbox, Kinect, and Windows Phone.

“Skype is a phenomenal service that is loved by millions of people around the world,” said Microsoft CEO Steve Ballmer. “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.”

Microsoft will incorporate Skype as a business division within the company and Skype CEO Tony Bates will become president of the Microsoft Skype Division, reporting directly to Ballmer.

“Microsoft and Skype share the vision of bringing software innovation and products to our customers,” said Tony Bates. “Together, we will be able to accelerate Skype's plans to extend our global community and introduce new ways for everyone to communicate and collaborate.”

Ballmer heaped praise on Microsoft’s new president of the Microsoft Skype Division.

“Tony Bates has a great track record as a leader and will strengthen the Microsoft management team. I’m looking forward to Skype’s talented global workforce bringing its insights, ideas and experience to Microsoft,” Ballmer said.

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. We are excited about Skype’s long-term future with Microsoft, as it is poised to become one of the world’s most dynamic and comprehensive communications platforms.”

Other members of the Silver Lake investment group include eBay, CPP Investment Board and Andreessen Horowitz.

Skype was founded in 2003 by two software developers and has grown to 663 million registered users in 2011.

In 2005 eBay bought Skype for $2.6 billion in cash and stock, then selling 70% of the company to private investors in a deal that valued Skype at $2.75bn. In 2010, Skype posted revenues of $860m and losses of $7m and now Microsoft is said to be courting the company. The company still had $686 million in long-term debt as of 31st December.

The acquisition is subject to regulatory approvals and closing conditions.

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