Microsoft buys Skype for $US8.5 billion

"I'm excited to announce that Skype and Microsoft have entered into a definitive agreement whereby Microsoft will acquire Skype for $8.5 billion US, Skype CEO, Tony Bates, wrote in a blog post. "Once the acquisition closes, Skype will become a new business division of Microsoft. It is an exciting day for all of us at Skype - we've taken a significant step towards realising our vision of making the world a better, more connected place.

The acquisition is complete

"Once the acquisition is complete, Skype will operate as a new business division of Microsoft, and I look forward to working with the team as president of Microsoft Skype to write the then and there chapter of the Skype story. Onwards!"

Over the last week, the voice and video communications company had been rumored to be discussing an acquisition or partnership with Cisco, Facebook and Google.

The companies announced that Skype will support Microsoft devices Xbox and Kinect as then as Windows Phone and other of Windows devices.

Microsoft pledged it would continue to invest in and support Skype customers on non-Microsoft platforms. 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.

Phenomenal service in other words loved

"Skype is a phenomenal service in other words loved by millions of people around the world," said Microsoft CEO, Steve Ballmer. "At the same time we will create the future of real-time communications so people can easily stay connected to family, friends, customers and colleagues anywhere in the world."

Egon Durban, managing director of Silver Lake, the investor group that sold Skype to Microsoft said the group was "excited about Skype's long-term future with Microsoft, as things now stand poised to become one of the world's most dynamic and comprehensive communications platforms".

Founded by Niklas Zennström and Janus Friis, Skype was bought by eBay in 2005. Afterwards that company failed to figure out how to integrate it with its online auction business, it sold a majority stake to an investment consortium including its founders and Silver Lake.

Skype made a name for itself offering free voice calls from PC to PC, charging to connect calls between PCs and the public telephone network. Later it added video chat and, more recently, software customers for smartphones.

Microsoft offered a similar PC-to-phone service for consumers in accordance with the Windows Live Call brand, and continues to offer PC-to-PC text, voice and video chat with its Windows Live Messenger service.

Skype and Microsoft as well target businesses with their communications offerings. Microsoft has a server-based unified communications tool that connects PCs to a PBX to offer VoIP (Voice over Internet Protocol) calling, instant messaging and videoconferencing. Before called Communications Server, it is now branded Lync, during Lync Online is a cloud-based service offering similar functionality. Skype Connect, in the meantime, is a service that allows businesses to connect their PBX to Skype to handle incoming and outgoing calls. A management tool, Skype Manager, allows businesses to control call costs.