Microsoft Purchases Skype for $8.5 Billion

In a rather surprising deal this morning, Microsoft purchased Skype for a cool $8.5 billion, gaining 100% ownership of the VoIP provider. Going forward, Skype will become a new business unit from within Microsoft, and according to the company, it will become an integral piece of the puzzle for upcoming products. Will we see Skype functionality in Windows Live Messenger and Windows Phone? It goes without saying, and in fact, that’s just the tip of the iceberg.

Still, a deal like this comes out of left field, as Microsoft hasn’t taken full ownership of another company since 2006, and in general, hasn’t had the best of luck putting its acquisitions to good use. Skype could be quite a bit different, however, as Microsoft is eager to become a huge player in cloud computing, and for that to succeed, a quality VoIP solution would be ideal. I am sure many will agree with me when I say that Skype certainly does what it sets out to do well.

Will Skype become an ad-infested application a la Windows Live Messenger? No one knows at this point, except perhaps Microsoft, but I am hoping it won’t. Skype has one thing that Live Messenger doesn’t, after all: paying customers. People who shell out cash for the service are not going to want to deal with ads, and if the time came when ads did happen, many might seek out Skype alternatives. Microsoft at this point of course wouldn’t want that to happen.

I also question the support Skype has for both Mac OS X and Linux. While Microsoft would never pull out of the mobile iPhone/Android/whatever market, OS X, and especially Linux, have never been major concerns of Skype in the hands of its previous owners. Do we expect Microsoft to care more? Hah!

Bates said the company is profitable. But in 2010, Skype reported a net loss of $6.9 million on nearly $860 million in revenue. It had $686 million in long-term debt, and slightly more than $1 billion in liabilities. Under the terms of the deal, Microsoft will assume Skype’s debt. Christopher Hickey, an analyst at Atlantic Equities, said the price was “slightly expensive,” but added that Microsoft plans to use its offshore cash balance to cover the cost. “It’s expensive, but it’s not the end of the world.”