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Microsoft to buy Skype

10 May 2011 10:23 (UTC +04:00)

Baku - APA-Economics. A deal between Microsoft and Skype could be announced as early as Tuesday, according to people familiar with the matter, Apple Insider reported.

The deal is expected to cost Microsoft between $7 billion and $8 billion, with the total value reaching about $8.5 billion once Skype’s long-term debt is taken into account.

Skype was founded in 2003 and has since grown to 663 million registered users. In 2005, eBay purchased Skype for $2.6 billion, but sold 70 percent of the company to private investors in 2009.

Goldman Sachs Group Inc. and JP Morgan Chase & Co. advised Skype on the deal, according to the Journal’s sources. Google and Facebook had also been rumored to be interested in acquiring the company.

The acquisition would be an uncharacteristically aggressive move for the Windows giant, which has traditionally avoided large deals.

Microsoft would look to Skype for help in competing in the Voice over IP and video chat markets. Long-time rival Apple has seen its FaceTime standard take off as sales of the iPhone 4 have been on a tear, while Google has seen success with its Google Talk service.

According to the report, Microsoft CEO Steve Ballmer sees the Internet as an "essential battleground" for the company. Microsoft’s Online Services Division lost $726 million last quarter. In the past year, the company has lost $2.5 billion from its online group. It’s not immediately clear, however, how Skype would help turn those losses around. Skype lost $7 million in 2010 off of revenue of $860 million.

Skype’s inroads into the mobile space are also seen as desirable assets to Microsoft. After losing significant market share to Apple’s iPhone and Google Android, Microsoft has refocused its efforts on the mobile phone industry. In February, the company announced a partnership with Nokia to bring Windows Phone 7 to the Finnish handset maker’s devices. Last week, the company took the wraps of a porting tool meant to help developers bring their iOS apps to Windows Phone 7.

Skype released version 5.1.0.935 of its Skype for Mac software on Monday, resolving a security issue that could allow hackers to gain control of a Mac via a maliciously crafted Skype message. The vulnerability made headlines last week when a security researcher publicized the issue. In response, Skype promised that an update would come early this week.