Microsoft to acquire Skype in $8.5b deal

NEW YORK: US software giant Microsoft will buy Internet phone service company Skype for $8.5 billion dollars, the companies announced Tuesday.

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

"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."

Microsoft said Skype will become a new business division within Microsoft, and that Skype CEO Tony Bates will assume the title of president of the Microsoft Skype Division, reporting directly to Ballmer.

Microsoft and Skype said the deal has been approved by the boards of directors of both the Redmond, Washington-based Microsoft and the Luxembourg-based Skype, which is owned by investor group Silver Lake.

Bates said 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," Bates said.

Silver Lake managing director Egon Durban said he is "excited about Skype's long-term future with Microsoft, as it is poised to become one of the world's most dynamic and comprehensive communications platforms."

The companies said Skype will support Microsoft devices like the Xbox game console and Kinect motion controller, Windows Phone and a wide array of Windows devices.

Microsoft will also support Skype clients on non-Microsoft platforms, they said.

Skype was founded in 2003 and acquired by online auction giant eBay in September 2005. It was sold to the investment group led by Silver Lake in November 2009.

Millions of people use Skype to make low cost or free phone calls over the Internet using their computers or smartphones. Skype bypasses the standard telephone network by channeling voice and video calls over the Web.

Buying Skype could be a way for Microsoft to shed some of its business software image and gain momentum in a hot smartphone market at a time when Internet lifestyles are going mobile.

Skype last year announced plans for an initial public offering of stock and appeared on its way to profitability, but investors are evidently eager for a payoff.