Wed, May 11, 2011 - Page 10 News List

Microsoft buys Skype for US$8.5bn

AP, NEW YORK

A pen points to a screen yesterday showing the logos of US software company Microsoft and Internet phone service Skype, in Berlin, Germany.

Photo: EPA

Microsoft Corp said yesterday that it has agreed to buy the popular Internet telephone service Skype SA for US$8.5 billion in the biggest deal in the software maker’s 36-year history.

Buying Skype would give Microsoft a potentially valuable communications tool as it tries to become a bigger force on the Internet and in the increasingly important smartphone market.

Microsoft said it would marry Skype’s functions to its Xbox game console, Outlook e-mail program and Windows smartphones. The company said it would continue to support Skype on other software platforms.

The sellers include eBay Inc and private equity firms Silver Lake and Andreessen Horowitz.

About 170 million people log in to Skype’s services every month, though not all of them make calls. Skype users made 207 billion -minutes of voice and video calls last year.

Most people use Skype’s free calling services, which has made it difficult for the service to make money since entrepreneurs Niklas Zennstrom and Janus Friis started the company in 2003. An average of about 8.8 million customers per month, or just over 1 percent of the user base, pay to use Skype services.

Skype lost US$7 million on revenue of US$860 million last year, according to papers that the company has filed since announcing its intentions last summer to launch an initial public offering (IPO) of stock. The IPO was later put on hold. Skype’s long-term debt, net of cash, was US$543,883 at the end of last year.

The Skype takeover tops Microsoft’s biggest previous acquisition — a US$6 billion purchase of the online ad service aQuantive in 2007.

Microsoft said Skype would become a new business division headed by Skype CEO Tony Bates, who will report directly to Ballmer.

Microsoft would be Skype’s -second large-company owner. EBay bought Skype for US$2.6 billion in 2005, but its attempt to unite the phone service with its online shopping bazaar never worked out.

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