Microsoft to Buy Skype for $8.5BMicrosoft to Buy Skype for $8.5B

Microsoft Corp. (Nasdaq: MSFT) has agreed to buy Skype Ltd. for US$8.5 billion, saying the deal will enhance its "existing portfolio of real-time communications products and services."

The deal, which values Skype at almost 10 times its 2010 annual revenues, had been expected. The two companies hope to close the acquisition by the end of this year.

Skype, which currently has 170 million "connected users" (active users of the service), will "support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices," states Microsoft, while Skype's existing users will, in turn, be connected with "Lync, Outlook, Xbox Live and other communities."

Microsoft added that it "will continue to invest in and support Skype clients on non-Microsoft platforms."

A key question within the mobile world will be the role that Microsoft envisages for Skype's capabilities in the device operating system sector. (See Microsoft + Skype + Nokia?)

Skype, in which a 70 percent stake was sold by eBay Inc. (Nasdaq: EBAY) for about $1.9 billion in November 2009, had been planning an initial public offering. Now the brokers won't get their pay day. (See Skype: In Numbers.)

— Ray Le Maistre, International Managing Editor, Light Reading