In its largest acquisition ever and the tech world’s most massive deal in years, Microsoft Corp. is buying Internet communications company Skype Global for a stunning $8.5 billion.
“The combination will extend Skype’s world-class brand and the reach of its networked platform, while enhancing Microsoft’s existing portfolio of real-time communications products and services,” the companies said in a statement.
Previously, Microsoft’s biggest buy was $6 billion for online advertising firm aQuantive in 2007.
Skype’s software allows users to talk for free online using messaging, voice and video and can also connect them to a land line or mobile phone for a fee. Users will now be able to connect to Microsoft offerings such as Lync, Outlook and Xbox Live, while Skype will support devices such as Xbox and Kinect, the companies said.
Skype is owned by an investment group led by Silver Lake, which bought the real-time voice and video company from its previous owner, eBay, in 2009 for slightly more than $2 billion. It was founded in 2003 and now has 170 million connected users who chatted for 207 billion minutes last year.
The company will become a new division of Microsoft and will be led by its current chief executive, Tony Bates.
This will be Microsoft’s first sizable acquisition since August 2008, when the Redmond software giant spent $486 million on Greenfield Online.
The purchase price includes the assumption of Skype’s debt.
In August 2010, Skype filed to go public, expecting to raise $1 billion, but not long after appointing a new CEO, former Cisco SVP Tony Bates, the company put its IPO plans in the freezer while it looked for ways to generate more revenue from the popular service.
Skype’s 2010 revenue was $860 million, adjusted EBITDA was $264 million, and – as many are tripping over each other to point out – the company actually lost $7 million last year.
So the question arises now??? Has Microsoft over paid for Skype???
Time will tell but whether you think the Microsoft deal makes sense or not, rest assured that companies like Google, Cisco and Apple, on the other hand, are not going to be too pleased about it. Not that either of them absolutely needed to own Skype, but in the hands of Microsoft it’s a much bigger threat to them than if it were still under eBay’s wings, or as a separate company.