Microsoft announced Tuesday it is buying Internet phone service company Skype for US$8.5 billion cash in the largest acquisition ever by the US computer software giant. “Skype is a phenomenal service that is loved by millions of people around the world,” Microsoft chief executive Steve Ballmer said in a statement. “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.”
Microsoft said Skype will become a new business division within Microsoft, and that Skype CEO Tony Bates will assume the title of president of the Microsoft Skype Division, reporting directly to Ballmer. Tens of millions of people use Skype to make low-cost or free phone calls over the Internet using their computers or smartphones. Skype bypasses the standard telephone network by channeling voice and video calls over the Web. Buying Skype could be a way for Microsoft to shed some of its business software image and gain momentum in a hot smartphone market at a time when Internet lifestyles are going mobile.
Microsoft’s biggest acquisition until now had been its 2007 buy of digital marketing firm aQuantive for US$6.3 billion. Skype had also reportedly attracted interest from Cisco, Facebook and Google. Microsoft and Skype said the deal has been approved by the boards of directors of both the Redmond, Washington-based Microsoft and the Luxembourg-based Skype, which is owned by investor group Silver Lake. Bates said Microsoft and Skype “share the vision of bringing software innovation and products to our customers.