Microsoft Corporation and Skype Global announced that they have entered into a definitive agreement under which Microsoft will acquire Skype, the leading Internet communications company, for $8.5 billion in cash from the investor group led by Silver Lake. The agreement has been approved by the boards of directors of both Microsoft and Skype.
Skype will be integrated into Microsoft devices and systems such as Xbox and Kinect, Xbox Live, the Windows Phone, Lync and Outlook, Microsoft said in a statement. The company has pledged to continue supporting and developing Skype clients on non-Microsoft platforms as well.
The acquisition is an expensive one for Microsoft. Not only is it the largest price Microsoft has paid for a company in decades, Skype is not yet profitable. Despite revenues totaling $860 million last year and operating profits of $264 million, the company lost $6.9 million overall, according to documents filed with the SEC. And the company carries $686 million in debt.
There is one clear set of winners here: Skype’s investors. A group including Silver Lake, Index Ventures, Andreessen Horowitz and the Canada Pension Plan (CPP) Investment Board purchased the company from eBay for $2.75 billion in September 2009.
Only time will tell how Microsoft uses Skype to the benefit of itself and its partners. However, we can expect some major services to be introduced which not only improve how the common users communicate but, also the way businesses do. Will Bates’ expectations of this deal — “This allows us to extend from hundreds of millions to billions of people. We think this is a set of services that can reach everyone on the planet.” — be turned into a reality?
Skype is communications software whose purpose is to break down barriers to communication. With an Internet-connected device, families, friends and colleagues can get together for free with messaging, voice and video. At low cost, they can also call landlines or mobiles virtually anywhere in the world. Skype has recently introduced group video, allowing groups of more than two people to do things together whenever they’re apart.
Founded in 2003 and based in Luxembourg. Skype can be downloaded onto computers, mobile phones and other connected devices for free.
Founded in 1975, Microsoft is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.