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Microsoft Buys Skype for $8.5 Billion

Marking the largest acquisition in Microsoft's history, the company today announced it has agreed to acquire Skype for $8.5 billion.

Skype runs the giant global videoconferencing and voice communication network that has 170 million subscribers and logged 207 billion minutes of conversations last year, according to the company.

The service is free, though the company has a paid offering for premium services such as establishing multipoint conferences and communications with non-Skype users.

Microsoft's decision to buy Skype was unexpected, through rumors started swirling yesterday of a possible deal. Although Skype, through its investor group Silver Lake, had been considering an initial public offering, there were also rumors in recent days that Facebook and Google were interested in acquiring the company.

Also, Microsoft has its own communications technologies including Lync for enterprise customers and Windows Live Messenger, but the acquisition of Skype promises to extend that footprint, Microsoft CEO Steve Ballmer said in a prepared statement.

"Skype is a phenomenal service that is loved by millions of people around the world," Ballmer said. "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 intends to run Skype as a separate division to be headed by its CEO Tony Bates, who will become president of that business. The deal is subject to regulatory approval.

Skype, based in Luxembourg, was founded in 2003 and acquired by eBay in 2005 for $2.6 billion. The eBay acquisition turned out to be a drag on the company, which last year spun it off.

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About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.

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