A New Age Dawning Under The MicroSkype

This morning Microsoft and Skype announced that they have entered into a definitive agreement under which Microsoft will acquire Skype for $8.5 billion in cash. MSFT - GOOG - ETR:DTE

The agreement has been approved by the boards of directors of both Microsoft and Skype. The acquisition will increase the accessibility of real-time video and voice communications to consumers and enterprise users.

Some users are worried - Gloria Sin writes on ZDnet:

"As one of the paying Skype users, I’m wary of what Microsoft will do to Skype (will it suddenly require frequent patches and updates to plug security holes, for example?) but hope it can help make Skype even more ubiquitous for digital communication."

Sin asks "Just why did Microsoft drop so much money for a company that always seem to be on the market the past couple of years (its most recent owners include original founders Niklas Zennstrom and Janus Friis, who reacquired most of the shares from eBay in 2009)? Once you get past the sticker shock, the deal does make business sense for both companies. After all, while Skype has over 663 million (170 million per month) global users and are on many mobile devices, only 8.8 million users pay for the service according to its April SEC filing, so it needs to expand to remain competitive."

A commenter on Sin's article calls out Microsoft:

"If you have a Windows PC, Mobile Device, or XBOX, expect to pay for what you get for free right now (i.e. Skype to Skype calls)."

TeensTalkTech blogs more optimistically:

"For this Skype deal to be successful Microsoft will want you to be using their service over the competition (FaceTime, Google Talk etc.) particularly when your on a non-Microsoft product."

With 170 million connected users and over 207 billion minutes of voice and video conversations in 2010, Skype has been a pioneer in creating rich, meaningful connections among friends, families and business colleagues globally. Microsoft has a long-standing focus and investment in real-time communications across its various platforms, including Lync, which saw 30 percent revenue growth in Q3, Outlook, Messenger, Hotmail, and Xbox LIVE.

Skype will support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices, and Microsoft will connect Skype users with Lync, Outlook, Xbox Live, and other communities. Microsoft will continue to invest in and support Skype clients 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 Microsoft CEO Steve Ballmer.

Founded in 2003, Skype was acquired by eBay in September 2005, and then acquired by an investment group led by Silver Lake in November 2009. Skype has made impressive progress over the past 18 months under Silver Lake’s leadership, increasing monthly calling minutes by 150 percent, developing new revenue streams and strategic partnerships, acquiring the intellectual property powering its peer-to-peer network, and recruiting an outstanding senior management team.

The acquisition is subject to regulatory approvals and other customary closing conditions. The parties hope to obtain all required regulatory clearances during the course of this calendar year.