Microsoft Acquires Skype for $8.4 Billion

Contributing Writer
Updated

It’s been just over two years since Skype and its old parent company eBay parted ways and it certainly wasted no time in finding a new buyer. Microsoft and Skype today announced a deal that would see the former acquire Skype from investor group Silver Lake for $8.5 billion in cash. We don’t need to tell you that $8.5 billion is a significant amount of cash, but as a price for Skype, it’s also going to shock a lot of people.

You see, in 2005, the company was sold to eBay for $2.6 billion, a price eBay felt was more than fair for a popular but still relatively small service that was expected to explode at any moment. Unfortunately for both companies, the partnership didn’t quite work out as planned. Skype grew, but slowly, and eBay didn’t really seem to know what to do with it. In April of 2008, just three years after its big purchase, eBay’s president and CEO John Donahoe said it would spend a year evaluating Skype before making any decisions about the company's future.

Fast forward a year and eBay announces plans to separate from Skype. In November of 2009, the online auction site sold Skype for approximately $1.9 billion in cash and a note from the buyer, Silver Lake Partners, in the principal amount of $125 million. TechCrunch reports that Skype filed IPO plans in August of 2010 and expected to raise $1 billion (its revenue in 2010 was $860 million). However, IPO plans were put on the backburner soon after the company’s new CEO, Tony Bates, was hired. That brings us to today's deal, which has already been approved by both boards of directors. Skype will become a new business division within Microsoft, and Tony Bates will assume the title of president of the Microsoft Skype Division, reporting directly to Ballmer.

With a company like Microsoft behind it, Skype has huge potential and, unlike eBay, it seems Redmond is excited to mix the service up with existing products and services. The press release sent out this morning indicated that Skype would support an array of Microsoft devices, including Xbox, Kinect, Windows Phone 7 phones and Windows computers. For its part, Microsoft will connect users with Xbox Live, Outlook and Lync, among others.

"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."

Who’s ready for Kinect and Skype?