Microsoft to buy Skype for $8.5bn

Software monolith loosens purse strings for biggest ever acquisition

Microsoft has agreed an $8.5bn (£5.2bn) cash deal for Skype in its biggest acquisition to date.

The webconferencing player is currently majority owned by private equity house Silver Lake, which also owns Avaya. The boards of directors at both Skype and Microsoft have green-lighted the deal.

The sale is expected to close this calendar year and, as soon as it does, the Microsoft Skype Division will be born as a new business unit of the software giant. Chief executive Tony Bates will assume a role as president of the division, reporting directly to Microsoft head honcho Steve Ballmer.

Skype technology will support various Microsoft wares including the Xbox, Kinect and Windows Phone, while users of the webconferencing service will be connected with Lync, Outlook, Xbox Live and other communities. The software titan claims those users on non-Microsoft platforms will also continue to benefit from support and investment.

"Skype is a phenomenal service that is loved by millions of people around the world," said Ballmer (pictured). "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 and Skype share the vision of bringing software innovation and products to our customers," added Bates. "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."

Background lowdown
Based in Luxembourg, Skype was founded seven years ago and provides its 663 million registered users with free-to-use voice, video and messaging comms platforms. Users can also call landlines and mobiles for a fee. Its new owner claims the service facilitated more than 200 billion minutes of conversation last year.

Between 2005 and November 2009, Skype was owned by eBay. The online auction site was bought out by Silver Lake. The service's profile rose steadily under eBay's stewardship and was given a massive shot in the arm by the backing of none other than TV mainstay Oprah Winfrey. The chat show queen began incorporating the technology in her show before devoting a whole programme to it, entitled Where the Skype are you?

A deal with Microsoft has long been predicted. Market watchers have suggested the software giant will use the acquisition as a springboard to competing more effectively with Facebook in the social networking arena.