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iZone International: Microsoft buys Skype

11-May-2011
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iZone International: Microsoft buys Skype

Amidst rumours of Google and Facebook fighting over Skype the latest news is that a deal has been made, but to the surprise of many, it’s with Microsoft. The latest reports suggest that Microsoft is buying out Skype for an all cash deal of $8.5 billion, the biggest buyout for the company yet.

eBay had acquired Skype in 2005 and sold off most of its stake in 2009, but for the e-commerce firm, this is proving to have been a very successful investment, with Skype’s valuation prior to announcing an IPO at a far lower $2.5 billion. Facebook and Google had both been in talks for amounts well above that valuation, but with Skype still struggling to find ways to make money, is such a deal good for Microsoft?

The price of $8.5 billion is definitely high, but considering the advantages it confers to Microsoft could well justify the deal and would hardly stretch Microsoft, which has a cash surplus of $50 billion, reports say.

In many ways, Google and Facebook already had solutions in place to make acquiring Skype a bonus, but not a necessity. For Microsoft, which is trying very hard to redefine itself following Apple’s surge into becoming the most valuable company in the world, acquiring Skype is a lot more advantageous.

Microsoft has recently tied up with RIM for the Blackberry Playbook, and with Nokia to try and revitalise their business with Windows Phone 7. Microsoft needed something that could compete with Facetime from Apple, and Google Voice for Android, and Skype could well be that product.

Facebook would also have had a lot to gain from the service, but a joint announcement between Facebook and Skype, which will bring video chat to the social network and Facebook Credits to Skype, is still expected, and Microsoft being an investor in Facebook and will have no reason to prevent this.

Skype could also enable Microsoft to strengthen its business collaboration offerings, and strengthen the company’s enterprise offering.

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