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Microsoft confirms $8.5 billion Skype purchase

Microsoft confirms $8.5 billion Skype purchase

Published: 10 May 2011 09:48 GMT+02:00
Updated: 10 May 2011 14:42 GMT+02:00

Skype, the IP telephony company founded and part-owned by Swedish entrepreneur Niklas Zennström, has been bought bought by US software giant Microsoft, the firms confirmed on Tuesday afternoon.

The statement confirmed speculation over the deal to buy the firm, whose product allows users to conduct video and telephone calls over the internet.

Microsoft confirmed that the deal is worth some $8.5 billion, dwarfing the $6 billion the US firm paid for online advertising firm aQuantive in 2007 and its largest acquisition since its founding in 1975.

The news of the pending deal has shocked analysts who consider the price to be a considerable premium for a firm which has consistently struggled to generate profit.

"It is going to be a very exciting year," said Helena Nordman-Knutson, a telecom analyst at Öhman Fondkommission referring to the highly competitive global telecom market.

There are suggestions that Microsoft plans to integrate the service into its Xbox 360 games console, according to a report in the UK Guardian.

Microsoft were on Tuesday morning unwilling to comment on the report, Skype was meanwhile unavailable for comment.

Niklas Zennström founded Skype together with Dane Janus Friis in 2003 and the firm was declared one of the success stories of the early internet age when it was sold to US auction website Ebay for $3.1 billion in 2005.

Zennström and Friis shared around $2.5 billion from the deal.

Despite rapid growth in user numbers Ebay sold around 70 percent of the stock to a group of investors comprising of Silver Lake Partners, CPPIB, Andreessen Horowitz, and the original founders - returning Zennström and Friis a 14 percent stake in the firm.

While the number of people using Skype has grown in recent years, revenues remaining small due to the low numbers of users paying for services. The firm has posted losses in four of the last five years.

Previous rumours have circulated in May linking Skype to takeovers by Facebook and Google. In talks with these companies Skype has been valued to $3-4 billion.

TT/The Local/pvs (news@thelocal.se)

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Your comments about this article

13:49 May 10, 2011 by karex
Oh that's just great. I had to switch to Skype after MSN kept showing the usual Microsoft related "all sorts of problems", now I guess that Skype won't work anymore either... Same thing happened to HP which used to be such a good quality product. After they bought Compaq, instead of some of their good quality rubbing off on Compaq it seems they ended up absorbing Compaq's sh** quality instead. My laptop burned out three times in as many years, literally, as in total internal meltdown...
14:27 May 10, 2011 by ilockitdown
my post was going to be almost exactly the same as urs karex, i guess these things didnt only happen to me
14:47 May 10, 2011 by ruimove
so..time to change, knowing MS soon we will have 2 millions different versions of skype that don't work.
19:15 May 10, 2011 by Tdye
Well, Skype will never work again

I guess MS is trying to keep up with the Jones' ( Apple) so they figured Skype would do..

and remember kids..4 words that never makes sense put together here in the states are

Military Intelligence and Microsoft Works
20:04 May 10, 2011 by Localer
$8.5 billion ? that hell lots of Money !!!!! guess Niklas Zennström going to be so rich that he does not mind Skatteverket chasing after him :D
00:28 May 11, 2011 by muscle
Ok whats next Windows Live Skype 2011 (a heavy - bulky application!!!! having no updates in Linux!!!)
04:24 May 11, 2011 by mkvgtired
The latest version of skype sucks. I have had countless problems with it. Dropped calls, multiple calls to get the video to work, etc. These are usually with transatlantic calls, so I guess it could be a network issue, but when I try to talk to my friends overseas on skype I seem to always have problems as of late.
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