Following reports circulating since last week that both Facebook
were looking into buying the popular VOIP
, Microsoft has apparently emerged the winner, although it remains to be seen if the Redmond giant really won. Skype is yet to be profitable, and lost nearly $7 million last year alone.
At $8.5 billion, this would be Microsoft’s biggest acquisition to date, easily eclipsing its over $6 billion purchase of aQuantive, dating back to May 2007. It is also Microsoft's first sizeable acquisition since 2008, when in August it acquired Greenfield Online for $486 million.
In its statement announcing the deal, Microsoft said that Skype will be integrated into Microsoft devices and systems such as Xbox and Kinect, Xbox Live, the Windows Phone, Lync and Outlook. The Kinect tie-in could be key: all those cameras attached to Xbox 360s could relatively easily be used to do video chat across Skype, with the images displayed on a TV.
It also slaps Apple's FaceTime in the ... well, face. Windows Phone, still not supported with a Skype client, will suddenly be put at the forefront of development, and will certainly be integrated into Microsoft's smartphone platform (this is also a wake-up call to Google's recent integration of voice chat into Google Talk, as well).
[The deal will also mean that, most likely, new features will come to the (still to be born) Windows Phone mobile version, first. Integration with the platform will also mean smoother operation of the app, assuming it's done correctly.]
Skype also has a huge customer base to play off of: 663 million, 170 million of which are regular users. 8.8 million of Skype's users are paying customers. That might answer the question of why Microsoft has eschewed developing their own service.
In August of last year, Skype filed to go public. It was expecting to raise $1 billion, but soon after appointing former Cisco SVP Tony Bates as their new CEO, the company put the IPO on hold. Despite revenues totaling $860 million in 2010, the company lost $6.9 million overall, according to documents filed with the SEC. It did manage to see operating profits of $264 million. The company also carries $686 million in debt, which Microsoft will, of course, also acquire.
The acquisition is of course subject to regulatory approvals. Microsoft said it hopes to complete the deal during the remainder of 2011. Skype will operate as a new business division of Microsoft (Microsoft Skype), and Tony Bates will stay on to become the president of the division.