Microsoft confirms $8.5 billion Skype purchase

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.

• Ericsson to buy internet TV unit from Microsoft (9 Apr 13)
• 'Every creative agency in California wants a Swede' (5 Mar 13)
• Swedish design firm makes big noise in Vegas (12 Jan 13)

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.