Microsoft and Skype announced that they have signed an agreement for Microsoft to acquire privately held Skype for $8.5 billion in cash. The deal will add Skype’s 170 million connected users and more than 207 billion minutes of voice and video calls (based on 2010 results) to Microsoft’s portfolio in the near term.
In the longer term, Microsoft devices like Xbox and Kinect and Windows Phone will support Skype, and Microsoft plans to connect Skype users with Lync, Outlook, Xbox Live and other communities. Given that more than 40% of Skype minutes are over video, Microsoft also plans to take advantage of Skype’s progress with video conferencing. Skype, a relative novice at creating ad-based revenues, can also benefit from Microsoft’s experience with online advertising.
ANALYSIS: Microsoft goes on the defensive with Skype acquisition
Microsoft’s CEO Steve Ballmer stressed that even with the acquisition, Skype will continue to support clients on non-Microsoft platforms like Android. 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.
In prepared remarks commenting on the deal, Ballmer said, “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.”
Bates added, “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.”
Founded in 2003, Skype was acquired by eBay in September 2005 for $3.1 billion, and then acquired for $1.9 billion in 2009 by an investment group led by Silver Lake. The acquisition is subject to regulatory approvals and other customary closing conditions. The parties hope to obtain all required regulatory approvals in 2011.
Next time, we’ll return to our regularly scheduled news coming out of this week’s Interop conference.
