With Skype acquisition, Microsoft bets big on online communications

$8.5B deal the largest in company's history

Microsoft is making a big move into communications with its surprise plan to acquire Skype.

The company announced May 10 that it will acquire Skype for $8.5 billion – marking the largest acquisition in Microsoft's history.

Skype runs the giant global videoconferencing and voice communication network that has 170 million subscribers and logged 207 billion minutes of conversations last year, according to the company.

The service is free, though the company has a paid offering for premium services such as establishing multipoint conferences and communications with non-Skype users.

Microsoft's decision to buy Skype was unexpected, althrough rumors started swirling May 9 of a possible deal. Although Skype, through its investor group Silver Lake, had been considering an initial public offering, there were also rumors in recent days that Facebook and Google were interested in acquiring the company.

Also, Microsoft has its own communications technologies, including Lync for enterprise customers and Windows Live Messenger, but the acquisition of Skype promises to extend that footprint, Microsoft CEO Steve Ballmer said in a prepared statement.

"Skype is a phenomenal service that is loved by millions of people around the world," 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." .

Microsoft intends to run Skype as a separate division, to be headed by its CEO Tony Bates, who will become president of that business.The deal is subject to regulatory approval.

The deal is seen as an effort by Microsoft to expand its communications platform and keep pace with the likes of Google and Apple.

The company could work Skype’s services into everything from its Bing search engine to its Xbox 360 game platform, reported Roger Cheng of Dow Jones Newswires. Skype could compete with Apple's Facetime video chat service and Google Voice, Cheng writes.

Skype, based in Luxembourg, was founded in 2003 and acquired by eBay in 2005 for $2.6 billion. The eBay acquisition turned out to be a drag on the company, which last year spun it off.

About the Author

Jeffrey Schwartz is executive editor of Redmond Channel Partner and an editor-at-large at Redmond magazine, affiliate publications of Government Computer News.

Reader Comments

Mon, Apr 7, 2014 Allan Roger

I personally feel that Skype being acquired by Microsoft will improve Skype`s performance much better. Alternatively, one can even try using RHUB`s web conferencing servers for conducting online meetings. It works well.

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