Microsoft 'Nears Deal To Buy Skype'

[george]

Microsoft 'nears deal to buy Skype'

Software giant could buy online phone service for $8.5bn, reports say, in attempt to make headway in the web market.

Reports suggest Microsoft could buy Skype for $8.5bn, including assumed debt

Software giant Microsoft is reportedly close to announcing an $8.5bn deal to buy Skype, the online video conferencing service, as it attempts to challenge Google's dominance in the web market.

An unnamed source told the Reuters news agency that the deal, which includes assumed debt, could be announced on Tuesday.

The price tag would make it Microsoft's most expensive acquisition to date, topping the $6bn it paid for online advertising service aQuantative in 2007.

The deal would also bring the US-based software giant at least 600 million users worldwide, who use Skype to make free voice and video calls over the internet. Around 8.1 million of those are paying customers, who use the service to make traditional phone calls at discounted rates.

Skype was launched in 2003 by Estonian software developers who were part of the group that created peer-to-peer file-sharing service Kazaa.

The service is said to have lost $7m on revenue of $860 million last year.

Buying Skype could be a way for Microsoft to shed some of its business software image and gain momentum in a growing smartphone market.

Three years ago Microsoft attempted to buy Yahoo Inc for $47.5m, but the deal was never closed. Yahoo is now worth about half of that.

Skype, which had delayed plans for an initial public offering, had recently been looking at other options, with reports that Facebook and Google were considering joint ventures with the company.

In 2009, eBay sold a majority stake in Skype to an investor group that included Silver Lake, the Canada Pension Plan Investment Board and Andreessen Horowitz for $1.9bn in cash and a $125m note.

EBay retained about a third of the company.

-- Agencies 2011-05-10

[thaimite]

If This deal goes ahead, I wonder how it will affect Skype for Linux, Mac, Android etc.

Probably not for the best is my guess

[Berek]

When was skpe ever a photo service? No doubt they'll screw the pooch like everything else they buy.

[george]

Yes, Microsoft is buying Skype

By Dan Primack May 10, 2011: 7:34 AM ET

So much for that Skype IPO.

Fortune has confirmed that Microsoft (MSFT) has agreed to buy the voice-over-Internet company for $8.5 billion, including the assumption of debt. Expect a formal announcement within the next hour.

There had been reports last week that Skype was in acquisition or partnership talks with both Microsoft and Facebook.

Skype will become a new business unit within Microsoft, to be run by current Skype CEO Tony Bates. He will report directly to Microsoft boss Steve Ballmer.

Luxembourg-based Skype began life as a VC-backed company, before being acquired by eBay for $2.6 billion in 2005. The combination didn't quite work out, and eBay gave public thought to either selling the unit outright or spinning it off into an independent public company. In November 2009, it agreed to sell a 65% stake in Skype for $1.9 billion to an investor group that included Silver Lake Partners, Andreessen Horowitz, Canada Pension Plan Investment Board and Index Ventures.

Skype then filed for a $100 million IPO last August. The company reported a $6.9 million net loss in 2010, on nearly $860 million in revenue.

A couple quick thoughts, as details continue to come in:

This is, obviously, a remarkable return for the PE/VC firms that carved out Skype in November 2009. Not just cash-on-cash, but also IRR (which takes length of investment into account). Remember, this was a very controversial deal at the time. Pretty sure the term "hairy" was used more than once. There were questions as to whether Skype's problems should be pinned on eBay or were inherent, and there were subsequent lawsuits from the company's founders (who ultimately received a small ownership stake). Moreover, this was the first time that Andreessen Horowitz -- a very new firm at the time -- had written a big check for something that didn't look at all like traditional venture capital.

Remember all that talk that Microsoft was on the M&A sidelines? Pretty sure that will be tamped down for a bit... Particularly if Facebook also made a bid.

More on this deal to come soon.

-- CNN 2011-10-10

[WyattEarp]

Microsoft again doing what they do best, scalp other companies good ideas. After some negotiating where they learn all the secrets of Skype they'll probably decline and release their own version, the way they usually do.

[Crushdepth]

I hate seeing innovative companies bought out by dinosaurs.

[soulinchiangmai]

Oh dear - and I was in such a good mood tonight

[thaimite]

Microsoft will continue to support Skype on Non MS platforms

Ballmer stated: “I said it and I mean it. We will continue to support non-Microsoft platforms. “We’ve got a track record,” the Microsoft boss added. “Look at the work we’ve done over the years

Read more: Ballmer: we'll support Skype on non-Microsoft platforms | News | PC Pro http://www.pcpro.co.uk/news/367258/ballmer-we-ll-support-skype-on-non-microsoft-platforms#ixzz1LyCMtahC

To support non Microsoft platforms for Skype does not necessarily mean they will continue to develop and improve Skype for non MS devices.

It is the last part of his statement

"Look at the work we’ve done over the years"

that really worries me!!