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Microsoft buys Skype for $8.5 billion cash

Microsoft has agreed to acquire Skype, the Internet communications company, for $8.5 billion in cash. Skype is owned by an investor group led by Silver Lake, which includes eBay Inc, Joltid Limited and founders Niklas Zennström and Janus Friis, the Canada Pension Plan Investment Board and Andreessen Horowitz, according to its website. The acquisition agreement has been approved by the boards of directors of both both companies.

Skype_LogoA statement by both companies said the acquisition could enhance the accessibility of real-time video and voice communications, expanding the benefits to both consumers and enterprise users, besides generating new business and revenue opportunities.

Microsoft CEO Steve Ballmer called Skype “a phenomenal service that is loved by millions of people around the world.” Skype has around 170 million connected users, with a usage tally of over 207 billion minutes of voice and video in 2010. Microsoft's earlier acquisitions in real-time communications include Lync, Outlook, Messenger, Hotmail and Xbox LIVE.

Founded in 2003, Skype was earlier acquired by eBay in September 2005, and thereafter acquired by the investment group led by Silver Lake in November 2009. In the past 18 months, Skype has seen monthly calling minutes increase by 150 percent, developed new revenue streams and strategic partnerships, acquired intellectual property powering its peer-to-peer network and recruiting a skilled senior management team. Reports said that the investment group that owned Skype has seen a virtual windfall, pegging their gains in the 18 months that they have owned the company at between 70 and 80 percent. The Silver Lake-led investor group acquired the majority stake in Skype from eBay in November 2009, a time marked by the global economic downturn, for $1.9 billion in cash and a $125 million note. eBay had kept around a third of Skype, and is reported to have made a total return of $1.4 billion on its original investment.

Skype will now support Microsoft's devices including gaming devices Xbox and Kinect besides the Windows Phone and other Windows devices. Microsoft said it will connect Skype users with Lync, Outlook, Xbox Live and other communities. Microsoft also committed to continued investment and support for Skype clients on non-Microsoft platforms. Skype works on a number of mobile devices running Nokia's Symbian platform, Apple's iOS, Blackberry and Android devices and on computers running Windows, Mac OS X, and Linux. Skype will form a new business division within Microsoft, with Skype CEO Tony Bates assuming the title of president of the Microsoft Skype Division, reporting directly to Microsoft CEO Ballmer.


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