Microsoft Reportedly Confirms $8.5 Billion Deal for Skype

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Looks like the fight for Skype is over. Just last week, reports surfaced that both Google and Facebook were looking at joint deals with the VOIP company, but now Microsoft has apparently finalized a buyout – for $8.5 billion, according to AllThingsD.

Follow-up: Microsoft Makes Skype Purchase Official: What You Should Know

If the deal is announced officially tomorrow morning – and there’s no absolute guarantee it will happen – it would be the biggest acquisitions in Microsoft’s history. Four years ago, Microsoft shelled out approximately $6 billion to acquire online ad firm aQuantive Inc. The Skype deal, on the other hand, would tap into over 663 million users. Microsoft evidently wants to get in while the going’s good.

Not surprisingly, there have been many rumors of major companies becoming involved just as Skype prepares to go public at the end of this year. Supposed to happen last year, Skype’s IPO got pushed back after bringing in a new CEO late last fall. The company is estimating that it’s IPO will raise close to $1 billion for the company.

Back in 2005, eBay purchased Skype for $2.6 billion. Unfortunately, eBay’s plans for the company faltered, and ended up with them selling 70 percent of their stake to outside investors. The Microsoft deal would more than double what eBay purchased it for six years ago. Meanwhile, Skype would have a large cash cushion to sit on until it does go public. Microsoft is expected to assume Skype’s debt.

The report, however, mentions some interesting points about Skype’s profitability:

Profits continue to remain elusive as the company expands its business worldwide. Last year the company posted revenue of $860 million and $264 million in operating profits, but still lost $7 million. The company had $686 million in long-term debt as of Dec. 31.

Still, Om Malik of GigaOm points out that Microsoft’s interest in Skype makes sense. He points out it could give Microsoft a big boost in its collaboration products (such as, while helping them out in the mobile sector with its Windows Phone software. Malik argues that it would boost Microsoft’s chances of working with outside carriers as they transition to LTE and 4G networks. The Journal cautions simultaneously that Microsoft would have to be careful about “pushback.”

We’re not quite sure on where Microsoft is going with this acquisition, but its becoming quite clear who won the biggest piece of the pie.

(via Wall Street Journal)

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