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Microsoft digs into its deep pockets to snatch up Skype

The Wall Street Journal reported earlier tonight that Microsoft was in talks to purchase VoIP company Skype for between $7 billion and $8 billion. Kara Swisher just recently confirmed the acquisition in her BoomTown column, starting that the deal is worth an estimated $8.5 billion. 

Earlier reports stated that Google and Facebook were duking it out to get a piece of Skype, but in the end Steve Ballmer and Microsoft's huge chest of cash put an end to those discussions. The earlier reports also pointed to a Skype valuation of $3 to $4 billion, so Microsoft's $8.5 billion purchase price hopefully will bring a hefty ROI.

For those keeping score, eBay bought Skype in 2005 for $2.5 billion. Four years later, eBay sold a 65% stake in the company for $1.9 billion.

The first beta of Skype was introduced in 2003, and as of December 2010, it had over 663 million registered users. The average number of monthly connected users is much lower, however, at 145 million. And when it comes to users that actually pay for the service, the numbers drop down to just 8.8 million. 

Registered users can make Skype-to-Skype calls and one-to-one video calls for free. Users can make Skype-to-phone calls at a rate of 2.3 cents/minute. Skype also offers subscription plans at a rate of 1.2 cents/minute. 

We'll have to wait a few more hours until we get all the juicy details on Microsoft's latest acquisition, but we're betting that the boys from Redmond plan on tightly integrating Skype with Windows Phone 7 to better compete with Google Voice.

Updated 5/11/2011 @ 8:34am

Well, the news is now official. Microsoft just announced that it is acquiring Skype for $8.5 billion in cash. Microsoft says that Skype will bolster its "existing portfolio of real-time communications products and services."

As expected, Skype will be tightly integrated into the Xbox 360 and Windows Phone 7 platform. Microsoft is also creating a new business division called the Microsoft Skype Division, which will be headed by Skype CEO Tony Bates (he will report directly to Microsoft CEO 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.”

“Microsoft and Skype share the vision of bringing software innovation and products to our customers,” said 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.”

You can read the full press release here.

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By AnotherGuy on 5/10/2011 12:54:20 AM , Rating: 2
Im sure Skype owners will be happy... hard work finally pays off

RE: wow
By Nyu on 5/10/2011 1:01:12 AM , Rating: 3
The original owners actually already sold it not long ago to eBay.

RE: wow
By Solandri on 5/10/2011 2:26:41 AM , Rating: 2
eBay bought it for $2.6 billion in late 2005. $5.9 billion appreciation in less than 6 years. Not a bad ROI.

RE: wow
By bug77 on 5/10/2011 7:58:42 AM , Rating: 2
If only eBay didn't sell Skype long ago.

RE: wow
By Camikazi on 5/10/2011 10:36:01 AM , Rating: 4
eBay has to be upset right now seeing what MS paid for Skype. I would be pissed knowing I sold that company for a loss and the next company made huge profit for it.

RE: wow
By ChuckDriver on 5/11/2011 12:04:04 AM , Rating: 2
eBay nearly doubled its money.

According to the article from the Atlantic, eBay sold 65% of its skype stock to a private equity firm, not all of it.

(The deal) gives eBay a 35% stake in a growing, (likely) profitable company, without the hassle of running it, which benefits eBay in the long-term.

35% of $8.5 billion is a $2.975 billion.

So eBay spent $2.5 billion ($1.3 billion in cash plus the value of 32.8 million shares of eBay stock) in 2005, then got $1.9 billion in cash in 2009 and another $2.975 billion in cash in 2011. They spent $2.5 billion and got $4.875 billion after six years. So that is a 95% return over six years, which is an average annual rate of return around 11%.

I'd say that is a decent rate of return.

"I'd be pissed too, but you didn't have to go all Minority Report on his ass!" -- Jon Stewart on police raiding Gizmodo editor Jason Chen's home

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