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Microsoft Announces £5bn Skype Deal [Updated]

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Logo Skype Microsoft
Logo Skype Microsoft

There has been a lot of news surrounding Skype lately with reports last week claiming it was about to tie up a deal with Facebook or Google but in a surprise move Microsoft is apparently on the verge of announcing that it has purchased the voice and video calling service.

The Wall Street Journal is reporting that Microsoft will announce a deal to buy Skype tomorrow morning for between $7 and $8 billion in what is seen as a surprise move by the computer giant. The valuation of Skype at that amount is what has surprised most analysts considering the Luxembourg-based company currently has debts of $686 million, an amount which Microsoft will assume as part of the deal. The purchase of Skype could see the service being deeply integrated into a range of Microsoft services including Xbox and Windows Phone devices.

Skype Windows
Skype was originally bought by eBay in 2005 for $2.6 billion but the expected major integrated services with the auction site never materialised. eBay cut some of its losses in 2007 by writing down Skype’s value to just $1.4 billion and selling off 70 percent of it. This deal, if it materialises, will be the largest in Microsoft’s history ahead of the $6 billion it paid for online advertising company aQuantive in 2007. Microsoft’s online division has been consistently loss-making for the last six year totalling a whopping $8 billion. It will be interesting to see what Microsoft do with Skype if the deal goes ahead. It could mean that they make it exclusive to the Windows operating system – both desktop and mobile – and its Xbox system. While this could significantly reduce its user base of 660 million, it could also mean Microsoft would be looking to convert more paying customers, which currently stands at around six percent.

We expect the details of the deal to be announced tomorrow morning going on the report in the Wall Street Journal and we will bring you all the details when we get them. 

Update: The deal has now been confirmed and will see Skype established as a separate business division inside Microsoft, dubbed Microsoft Skype, alongside XBox Live, Kinect and Windows Phone. Tony Bates, Skype CEO,  will become president of Microsoft Skype and report directly to the technology giant's chief executive, Steve Ballmer.

"Skype is a phenomenal service that is loved by millions of people around the world," said 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. Tony Bates has a great track record as a leader and will strengthen the Microsoft management team. I'm looking forward to Skype's talented global workforce bringing its insights, ideas and experience to Microsoft."

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.

Ballmer has said it will continue to support the platform outside the Microsoft eco-system easing the worries of Mac and Android users out there.

Source: Wall Street Journal

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