Microsoft spend $8 billion on Skype (update)

Latest reports are indicating that Microsoft have closed a deal with Skype to take over the business.

Apparently a deal between Microsoft and Skype has been announced for a whopping £8.5 billion (£5 billion).

Skype has been one of the industries biggest success stories in recent years, after being founded in 2003, it has grown to 663 million users. In 2005, eBay purchased Skype for $2.6 billion, but has sold 70 percent of the company to private investors in 2009. Microsoft weren't the only ones interested in a takeover however as Google and Facebook were also linked with talks.

Apple, one of the biggest competitors with Microsoft have seen their FaceTime platform grow from strength to strength as sales of the iPhone continue to increase. Google have also had success with the Google Talk service. This acquisition they could compete in the Voice over IP and video chat markets.

Microsoft CEO Steve Ballmer has said that he sees the internet as an ‘essential battleground' for the company. Microsoft's Online Services Division has lost $726 million in the last quarter. The company has also lost $2.6 billion from its online group. Skype would need some adjustment however as their business plan also lost $7 million on a revenue stream of $860 million.

With Microsoft's focus in the mobile industry Skype makes an interesting addition to their portfolio as it would strengthen their position across multiple platforms. Microsoft have made deals with Nokia, and there are even rumors of a BlackBerry takeover down the line.

KitGuru says: It might make sense for Microsoft to take over a popular client, as they are having little success with their own software. However many are saying they have ‘overpaid' for Skype.

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