Software giant Microsoft has agreed acquire internet communications company Skype 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, the two firms said in a joint statement.
Microsoft said that the deal would extend the reach of Skype’s networked platform, while enhancing its existing portfolio of real-time communications products and services.
Microsoft added that it has “a long-standing focus and investment in real-time communications” across its platforms, including Lync, Outlook, Messenger, Hotmail and Xbox LIVE.
Skype will support Microsoft devices like Xbox and Kinect, Windows Phone and numerous Windows devices, while Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities. Microsoft will also continue to invest in and support Skype clients on non-Microsoft platforms.
Under the deal, 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.
Steve Ballmer, CEO, Microsoft, described Skype, which recorded 170 million users in 2010, as a “phenomenal service”.
“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,” he said.
Tony Bates added: “Microsoft and Skype share the vision of bringing software innovation and products to our customers. 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.”
Richard Edwards, principal analyst at Ovum, said Skype would make a good fit with Microsoft’s portfolio. “It's [Skype] popular, it runs on Windows PCs, and later this year it will be available on Windows Phone 7. Perhaps more importantly for the rest of us, Skype also runs on other computers, such as Mac and Linux, and mobile phones too, such iPhone and Android-based devices,” he said.
He added that Microsoft could also build on Skype’s potential in the enterprise sector. “Skype is used by millions of consumers around the world to make free Internet telephone calls and cheap calls to landlines, but we should not forget that Skype for business also exists, making it an attractive, low-cost option for smaller companies looking for voice and video conferencing capabilities.
"For enterprises, Skype Connect lets organisations integrate Skype with their SIP-enabled private telephone switchboards, and Skype Manager enable the business to track, trace and manage the use of this facility by employees,” he said.
Founded in 2003, Skype was acquired by eBay in September 2005, and then acquired by an investment group led by Silver Lake in November 2009. Skype has made significant progress over the past 18 months, increasing monthly calling minutes by 150%.