Microsoft To Buy Skype For $8.5 Billion

Microsoft is buying Skype, which millions of consumers use to hold peer-to-peer conversations and video conferences. The price tag is the biggest ever for a Microsoft acquisition - $8.5 billion.

“Skype is a phenomenal service that is loved by millions of people around the world,” said Microsoft CEO Steve Ballmer. “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.” 

Division of Microsoft

Skype will become a new business division within Microsoft, and Skype CEO Tony Bates will assume the title of president of the Microsoft Skype Division, reporting directly to Ballmer.

Skype is basically communications software. With an Internet-connected device, families, friends and colleagues can use it for free with messaging, voice and video, in a peer-to-peer connection. For a small charge, they can also also call landlines or mobile phones. The company recently introduced group video, allowing groups of more than two people to do things together whenever they're apart.

Founded in 2003 and based in Luxembourg. Skype can be downloaded onto computers, mobile phones and other connected devices for free. It counted over 170 million users and logged over 207 billion minutes of voice and video conversations in 2010.

The deal should help Microsoft where it needs it most; in the areas of video and voice communication. Microsoft also expects to use Skype technology on several platforms, including Xbox 360 and outlook.

Still free?

The question for Skype users is this; will Skype remain a free service under Microsoft? The company has struggled to make a profit, mainly because it receives no revenue from much of its services.

Microsoft, not known for giving things away, may be looking for new ways to create revenue with the acquisition. After all, it is staking $8.5 billion on the deal.

“Microsoft has a long-standing focus and investment in real-time communications across its various platforms, including Lync, Outlook, Messenger, Hotmail and Xbox LIVE,” the company said in a release.

Skype will support Microsoft devices like Kinect, Windows Phone and a wide array of Windows devices, and Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities.