Software giant Microsoft (MSFT) today announced plans to buy Internet phone service Skype for a cool $8.5 billion in cash, a rich price as it tries to recuperate ground on expanding competitors such as Google (GOOG). Skype was initially sold for a relative bargain at $2.5 billion to eBay (EBAY) in fiscal 2005, who consequently sold the majority of it off to Silver Lake in fiscal 2009 at a total valuation of $2.75 billion.
Xbox, Kinect and Windows Phone support are explicitly mentioned in the announcement of this definitive agreement, as is a wide array of Windows devices. Microsoft said it will connect Skype users with Lync, Outlook, Xbox Live and other communities.
“Skype is a phenomenal service that is loved by millions of people around the world,” said in a statement Microsoft CEO Steve 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.”
A new Microsoft Division will now be opened up to accommodate the newly acquired company. Skype Technologies CEO Tony Bates will assume the title of president of the Microsoft Skype Division, reporting directly to Ballmer. The agreement has been approved by the boards of directors of both Microsoft and Skype.
Investors however, seem to have expressed skepticism over the deal, sending Microsoft shares down 32 cents to $25.21 in Nasdaq Composite trading. In a joint phone interview with Skype Chief Executive Tony Bates, Mr. Ballmer said the deal is going to be accretive to M’soft earnings in “year one” after the financial transaction closes.