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Read more with google mobile : Microsoft to buy Skype for $8.5 billion, price seen high |

Edition: U.S. Article Comments (14) Microsoft buys Skype Microsoft inks $8.5 billion Skype buy Analyst view: Microsoft acquires Skype Is Skype better with Facebook than Google? Salmon: How being public eases acquisitions Follow Reuters Facebook Twitter RSS YouTube Read PIMCO raises bet against U.S. government debt 09 May 2011 Microsoft to buy Skype for $8.5 billion, price seen high 10:30am EDT Arnold Schwarzenegger, wife Maria Shriver separate 1:44am EDT Obama administration fights to save healthcare law 11:02am EDT Memphis braces for Mississippi River flood crest | 09 May 2011 Discussed 165 Concerns raised over shooting of unarmed bin Laden, burial 144 Obama at U.S. base to pay tribute to bin Laden mission 114 Boehner demands trillion-dollar cuts in debt deal Watched New video game takes aim at Bin Laden 2:08am EDT US releases video of bin Laden from compound Sat, May 7 2011 Pakistan says bin Laden accusations "absurd." Mon, May 9 2011 Microsoft to buy Skype for $8.5 billion, price seen high Tweet Share this By Nadia Damouni and Bill Rigby NEW YORK (Reuters) - Microsoft Corp plans to buy Internet phone service Skype for $8.5 billion in cash, a rich price as it seeks to regain ground on growing rivals such as Google Inc. Microsoft's interest in the... Email Print Related News Analyst View: Microsoft snatches Skype for $8.5 billion 10:30am EDT Analysis & Opinion Deals wrap: Blavatnik’s Access Industries wins bid for Warner Music Tech wrap: Facebook, Google mull Skype tie-ups Related Topics Technology » Deals » Global Deals Data 2011 Q1 » Inflows Outflows » Media » Stocks A page from the Skype website is seen in Singapore, May 10, 2011. Credit: Reuters/David Loh By Nadia Damouni and Bill Rigby NEW YORK | Tue May 10, 2011 10:30am EDT NEW YORK (Reuters) - Microsoft Corp plans to buy Internet phone service Skype for $8.5 billion in cash, a rich price as it seeks to regain ground on growing rivals such as Google Inc. Microsoft's interest in the money-losing but popular service highlights a need to gain new customers for its Windows and Office software. Skype has 145 million users on average each month and has gained favor among small business users. Investors expressed skepticism over the deal, sending Microsoft shares down slightly. "It doesn't make sense at all as a financial investment," said Andrew Bartels, an analyst at Forrester Research. "There's no way Microsoft is going to generate enough revenue and profit from Skype to compensate." The sale marks a big payday for Skype's owners, online auction site eBay Inc and a group of investors including Silver Lake, the Canada Pension Plan Investment Board and Andreessen Horowitz. Skype delayed plans for an initial public offering that was expected to value the company at more than $3 billion. It had been looking at other options, including tie-ups with Facebook and Google. Such a deal was expected to value Skype at $3 billion to $4 billion. The Luxembourg-based company, which allows people to make calls at no charge but has also developed premium services, would give Microsoft a foothold in the potentially lucrative video-conferencing market as businesses shift to lower-cost ways of communicating. Skype could be combined with Microsoft software such as Outlook to appeal to corporate users, while the voice and video communications could link to Microsoft's Xbox live gaming. Longer-term, Skype would offer Microsoft another route to develop its mobile presence, an area it has already put more energy and resources into as PC usage comes under threat. Skype is set to become a new business division within Microsoft with Skype Chief Executive Tony Bates in charge and reporting directly to Microsoft CEO Steve Ballmer, Microsoft said. Microsoft shares were down 13 cents, or 0.5 percent, at $25.70 in early Nasdaq trading. The Skype deal is the biggest in the 36-year history of the world's largest software company. It was first reported late on Monday by tech blog GigaOM. The $8.5 billion price tag was a surprise. Although the sum would not stretch cash-rich Microsoft, some said it was high for a company whose ownership has changed several times during its relatively short life. "In this atmosphere of Internet Bubble 2.0, picking up an unprofitable online company for roughly 10 times sales probably seems downright cheap," said Shanghai-based Michael Clendenin, managing director of consulting firm RedTech Advisors. "But if you consider (it) was just valued at about $2.5 billion 18 months ago when a chunk was sold off, then $8.5 billion seems generous and means Microsoft has a high wall to climb to prove to investors that Skype is a necessary linchpin for the company's online and mobile strategy," he added. Skype, which was formed in 2003, was bought by eBay Inc in 2005 for $3.1 billion. Last year it had in $860 million in revenue but posted a net loss of $7 million, according to data in its initial public offering filing. In 2009, eBay sold a majority stake in Skype to the investor group for $1.9 billion in cash and a $125 million note. EBay retained about a third. Microsoft's Ballmer said his company did not use Wall Street advisers on the deal, approaching the investor group that owns Skype directly. Skype was advised by Goldman Sachs and JPMorgan. (Additional reporting by Megan Davies, Bill Rigby and Sinead Carew, Sakthi Prasad in Bangalore, Clare Jim in Taipei and Melanie Lee in Singapore; Tarmo Virki in Helsinki and Nicola Leske in Frankfurt; Writing by Alexander Smith; Editing by Louise Heavens and Derek Caney) Technology Deals Global Deals Data 2011 Q1 Inflows Outflows Media Tweet this Share this Link this Digg this Email Reprints We welcome comments that advance the story directly or with relevant tangential information. We try to block comments that use offensive language, all capital letters or appear to be spam, and we review comments frequently to ensure they meet our standards. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. Comments (14) RufusDaddy wrote: Thanks Microsoft. Now I have to look for a new service to use because I will not use anything you own. May 09, 2011 10:47pm EDT -- Report as abuse Trooth wrote: @RufusDaddy Microsoft is about the least evil of the big tech companies now. Apple and Google have come to be the more monopolitistic companies. Not to mention the most intrusive. Your choice is understandable though with Microsoft’s past. May 09, 2011 11:12pm EDT -- Report as abuse ssn wrote: Microsoft is simply desperate and is now reacting spontaneously. The only reason they are buying Skype is because Google & Facebook were interested. May 09, 2011 11:56pm EDT -- Report as abuse See All Comments » Add Your Comment Social Stream (What's this?) © Copyright 2011 Thomson Reuters Editorial Editions: Africa Arabic Argentina Brazil Canada China France Germany India Italy Japan Latin America Mexico Russia Spain United Kingdom United States Reuters Contact Us Advertise With Us Help Journalism Handbook Archive Site Index Video Index Reader Feedback Mobile Newsletters RSS Podcasts Widgets Your View Analyst Research Thomson Reuters Copyright Disclaimer Privacy Professional Products Professional Products Support Financial Products About Thomson Reuters Careers Online Products Acquisitions Monthly Buyouts Venture Capital Journal International Financing Review Project Finance International PEhub.com PE Week FindLaw Super Lawyers Attorney Rating Service Reuters on Facebook Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests. NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq delayed by at least 15 minutes. For a complete list of exchanges and delays, please click here.

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