Microsoft to buy Skype in its biggest acquisition yet

Microsoft Corp. (MSFT) dropped a bombshell by announcing this morning that it will acquire Luxembourg-based Skype Global in a deal will shake up the mobile, video and gaming industries. The $8.5 billion deal, the largest in the history of Microsoft, was announced earlier this morning. Microsoft’s previous largest purchase was $6 billion for online ad firm aQuantive in 2007.
Skype’s voice-over-IP, messaging and video phone call service has approximately 170 million monthly users who talked for 207 billion minutes last year, with some users paying to make low cost long-distance calls. Skype also has apps on the Android and iOS operating systems.
Until the deal is completed, Skype wil remain owned by an investment group led by Silver Lake, which bought it for $2 billion from the company’s previous owner, eBay, in 2009.
Microsoft will likely use the buyout to bolster improvements to its own video chat services in software and hardware offerings by the company including Lync, Outlook, Xbox Live, Windows, and the Kinect motion sensor device. The deal also gives Skype and Microsoft some leverage to compete with Google and the Facetime video chat function from the iOS platform.
In a web broadcast this morning, Microsoft said that it would like to avoid major regulatory issues and hopes to complete the deal by the end of 2011. The boards of both companies have already approved the measure.
Microsoft CEO Steve Ballmer said the deal was closed last night and that the offer to buy Skype came unsolicited. Skype CEO Tony Bates, who will remain in his role at Skype, said that the company plans to use video ads and will seek more expansion in mobile devices, such as Windows Phone devices.
Ballmer and Bates eluded that Skype is looking to grow to “billions” of users. The combination of Microsoft’s assets and deployment models and Skype’s innovations may mean this could be a cause of concern to wireless carriers.