Microsoft acquires Skype

Microsoft and Skype confirmed today an agreement under which Microsoft will acquire Skype for $8.5 billion in cash from an investor group which includes the Canada Pension Plan Investment Board. led by Silver Lake.

Upon approval by the boards both companies, Skype will become a new division of Microsoft. Tony Bates, the current Skype CEO, will run the division and will report directly to Microsoft CEO Steve Ballmer.

Skype is a software application that allows users to make voice calls and chats over the Internet. Calls to other users within the Skype service are free, while calls to both traditional landline telephones and mobile phones can be made for a fee using a debit-based user account system. Skype currently has 170 million connected users who carried on more than 207 billion minutes of voice and video conversations in 2010.

Microsoft says it will work to integrate Skype with many of its devices including the Xbox and Kinect as well as continue to invest in and support Skype clients on non-Microsoft platforms.

“Skype is a phenomenal service,” said 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.”

Founded in 2003, this is the fourth time Skype has experienced a significant ownership change since its inception. In 2005, eBay purchased the company for $2.6 billion from a group which included its original founders. In 2009, eBay agreed to sell a 65% stake in Skype for $1.9 billion to an investor group led by Silver Lake. In August 2010, Skype filed for an IPO. At the time, the company reported annual revenues of almost $860 million.

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