Microsoft Buys Skype in $8.5 Billion Deal

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Microsoft will purchase VoIP service juggernaut Skype for $8.5 billion in a deal to be officially announce Tuesday morning. The all-cash deal will make Microsoft a powerful player in Internet-based voice and video communications overnight. Microsoft issued a press release Tuesday morning making the rumored acquisition official.

Previous reports suggested the purchase price would be somewhere between $7 billion and $8 billion. Skype has been on sale for a while now, and a number of companies reportedly showed interest in purchasing the Web-based phone and video chat service, including Facebook, Google, and Cisco.

The $8.5 billion purchase is Microsoft's largest acquisition in nearly three decades. Until now, Microsoft's most expensive acquisition was its 2007 purchase of digital marketing services agency aQuantive for $6 billion.

Despite Skype's having a debt of $686 million, the deal should be a plus for Microsoft. After all, Microsoft will finally have a brand-name Web service under its wing, though it's believed Microsoft plans to integrate Skype into Microsoft Live.

Microsoft's Plans for Skype

Microsoft says Skype will support Microsoft devices such as Xbox and Kinect, Windows Phone and a wide array of Windows devices. It added the Skype service will be integrated into Microsoft communities such as Lync, Outlook, and Xbox Live. It added that it will also continue to invest in and support Skype clients on non-Microsoft platforms.

"Skype is a phenomenal service that is loved by millions of people around the world," said Microsoft CEO Steve Ballmer. "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."

Another reason Microsoft will benefit from Skype--if Microsoft plans (and I'm sure it does) to use Skype on its Windows Phone 7 platform, it will finally have a competitive alternative to Google's Google Voice and Apple's Facetime services.

GigaOm breaks down who (likely) made what, based on an $8.5 billion purchase price:

- eBay gets $2.55 billion (eBay purchased a 30 percent stake in Skype in 2005)

- Skype co-founders Niklas Zennström and Janus Friis get $1.19 billion for their 14 percent stake

- Silver Lake, Andreessen Horowitz, and the Canada Pension Plan Investment Board (CPPIB) get $4.76 billion for their 56 percent stake

And of course Microsoft is out $8.5 billion, but they now have a new tool with which to (try to) terrorize Google and Apple. And everybody's happy!

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