Microsoft to acquire Skype for $8.5 billion

Software giant confirms it will "continue to invest in and support" Internet phone clients on non-Microsoft platforms; Kinect, Xbox Live integration promised.

At the 2010 Electronic Entertainment Expo, Microsoft put Kinect's video chat capabilities front and center with a demo of Video Kinect. During that demo, connectivity between Kinect users and those using Windows Live Messenger on other devices was promised, and it now looks like there is going to be another option added--popular voice over IP service Skype.

Skype/Kinect cross-compatibility has been promised.

Microsoft today confirmed that it has reached an agreement to buy Skype for $8.5 billion (£5.2 billion). Skype is the leading provider in the consumer VoIP space, with 170 million users worldwide. Services include free standard and video calls between Skype users on home computers, the ability to call any phone number from Skype for a fee, and the ability to generate a phone number that can be reached from a standard phone.

Skype will now support the Xbox platform, including Kinect, though no time frame has been outlined as to when the new services will become available. Microsoft also said it would connect Skype users with its platforms and communities, such as Xbox Live. Notably, as part of Xbox Live's 2010 fall update, the publisher updated the service's voice chat audio codec.

Microsoft also confirmed that it would continue to "invest in and support Skype clients on non-Microsoft platforms." That will likely be good news for Valve, which just recently integrated Skype functionality into its online platform, Steam.

Skype's applications currently run both on home PCs and mobile devices, and they use a peer-to-peer network for voice and video traffic. The company was founded in 2003, before being bought by eBay in 2005 in a transaction that was eventually worth around $3 billion. Four years later, it was mostly sold to a venture capital group called Silver Lake in a deal that valued Skype at $2.75 billion. Skype will now become Microsoft Skype Division, with its current CEO, Tony Bates, as president. Bates will report directly to Microsoft's current CEO, Steve Ballmer.

While the deal has been approved by the boards of both Skype and Microsoft, the acquisition is still subject to regulatory approval and "other customary closing conditions." Microsoft says it hopes all such clearances should be granted during the course of 2011.

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Discussion

258 comments
paranormalnut
paranormalnut

@Phatjam98 I have friends who are dev's. and it is not Sony doing any bullying. Sony was unable to bring to the table what they told dev's they would. First off the system mem is less than 360 and the cell is new in a video game system, the cell was been around in the mid 90's and was never made for home computers or gaming. It was not that making games were hard to do on the PS3, it had more to do with the cell and the tools Sony had for it. Now we have exclusives being not so exclusives any more because it takes a lot of cash to make a game and they want that return and then some faster any way they can. Next gen the systems will not be as much as they were. I know for a fact that Sony will use the same cell but use true cores. That I'm 100% on. That will keep the price down.

Phatjam98
Phatjam98

@paranormalnut Yeah, I feel badly for the PS3 guys out there waiting for Sony to get it done and get online service back up and running. It isn't right that they have to suffer right now because Sony didn't do their work years ago. However, after this fiasco is over, it shouldn't ever happen to Sony again. I mean if it does they will almost force themselves out of the console and online entertainment market and they are smarter than that. In my opinion Sony has been very arrogant this gen both with developers and with users. They spent the first few years almost bullying the developers to the point alot of them took the exclusives that Sony was almost guaranteed and ended up putting them out on all systems at once. Now they seem to have learned that lesson and good games are starting to make their way to the PS3. But then they also put out a system that was far too expensive and expected everyone to just fork over 600 bucks... its still the most expensive system by far and it probably will remain expensive till its life span is over. Sony needs to take this time to pull back and realize that they are not the only show in town anymore.

Phatjam98
Phatjam98

@paranormalnut It happens every day in every aspect of computing. MS would like to have had people using its current Windows Live software to do online chats and video chats, but it didn't have the install base or notoriety of Skype so MS is acquiring Skype to expand its business. The Skype software will remain free to anyone, there is no fee to use the Skype software and their never will be. So when you assume that Skype charges companies like Apple or MS to be able to run its software you are way off base. Skype makes what little money it does off of that small percent that use Skype to call land lines and cell phones. Again, the reason business people are critical of this deal is that MS payed way more than it is worth as it continues to loose money, which is the reason Ebay sold most of their steak a while back. It is now on MS to turn the customer base and the technology into a viable part of its current business model and software offerings. Bringing the technology to Xbox, integrating it with its office suite and other services should increase their current ventures into communications and compete a bit better with Google, which is what this is aimed at.

Phatjam98
Phatjam98

@paranormalnut No their is no licencing fee for the Skype software. One of the problems Skype has had is that it is a free to use bit of software for computer/device to computer/device connections, while it only charges for computer to traditional telephone/cell phone calls. Sony, MS Windows, Apple Mac pay absolutely nothing to Skype for users to install and use the software that runs the service. So yes, in a perfect world, if you are a developer you would rather people use your software/services rather than your users using another companies service. However that is how the computer world works. Apple does not have an Office suite, the two main suites are offered by MS with Office, and by I believe Sun system(maybe Java now not sure) with Open Office. Sony makes computer hardware and they license Windows for the most part even though they could choose to ship some form of Linux.

paranormalnut
paranormalnut

@Phatjam98 I back you on your comment about XBL. It was not down for 2 weeks and nothing like what happen to PSN has happen to live. It went down for a day and then people had a hard time getting on or staying on because 1 millon people wanted on all at once.

Phatjam98
Phatjam98

@hannify Yes it is good that Sony is gonna give the customers something for this fiasco, but really... What choice do they have? Even MS gave a free game away to subscribers when they had their outages for 14 days. Sony will probably have to give away more than just 2 games if it goes longer than the end of this month.

paranormalnut
paranormalnut

@Phatjam98 Let me try it like this. You and I both own a software/hardware comp. You buy a 3rd party software that I use in my software/hardware. My goal is to be on top and make money. Why would I pay you a fee when you and I are in " Competition" with each other. I could have my people make something like what 3rd party what ever it is and maybe even better. I also did not say MS was gonna change business model for this software. Yes there is a lic fee for comps like Mac and sony to run Skype. How would Skypes make money or even keep them self going. It is free for us but some one is paying for it. By the way, I am from the U.S. My windows phone is crap and I can not really see what I'm typing.

Phatjam98
Phatjam98

@hannify So the comparison to the MS 14 day service outages do not work. When MS has XBL go down because of a malicious attack that makes them rebuild the system from scratch and have the service down for weeks on end, you can make those comparisons again. In the mean time, you enjoy paying Sony for PSN that you cant use, I'll enjoy XBL that is up, functioning and costs me literally less than a fast food meal per month.

Phatjam98
Phatjam98

@hannify XBL was offline for 2 weeks in durring the 07/08 holidays you are correct. However, it was not down completely and was not brought down by malicious attacks. XBL went up and down at that time because MS did not have enough servers. All the kiddies got their Xbox's for Xmas and got on XBL. Microsoft made a mistake by not having the infrastructure in place and they didn't have enough XBL staff to deal with it at that time. It took MS 2 weeks to increase the servers and load capability and to hire staff to handle the huge increase in membership. Sony went down because their network apparently had more holes than a brick of swiss cheese and has been down completely with no end date in sight. The comparisons begin and end with the services going down. XBL never fully went down in those 2 weeks, it would crash and then have to be brought back up, or it would be taken down to add the new infrastructure to handle the load that was making the service crash. Sony had to take down the network fully in order to rebuild the service. I agree they shouldn't rush anything as they need to build a PSN that functions properly and has proper security built into it. However, shouldn't Sony have done this years ago? That is the point. Sony put together an online service for its PS3 that was free. They clearly supported it as though it was a free service. That is why it has gone down and will be down for who knows how long.

blackace
blackace

@gameking5000 said: @blackace There are other people who use Microsoft products. Not just XBOX users. *************************************************************** Duh! I know that. This is a gaming site however. With this type of news, we expect it to be game related. How will Microsoft incorporate Skype into games with their video camera? Still think it was a waste of money, especially since they are short on quality 1st party exclusives for the last 2 years. They could have done a lot more with that money for the XBox 360.

Phatjam98
Phatjam98

@hannify So MS increases the cost of XBL by less than $1 per month after it has been out for years and its use and scope has changed drastically and you think that MS is just looking for reasons to increase the yearly charge? Interesting. Maybe you should take a look at how business runs and how those types of decisions are made. Because you and everyone else that cries about that massive $5 per month fee and how its just sooo expensive really need to get a clue. Seriously, go get a PS3 and see how PSN works out for you free of charge. I mean you'll have to wait for awhile because it doesn't function right now, but yeah, $5 bucks a month is just way too pricey. I mean, you'll have to get one less happy meal a month... or a couple less bottles of soda, or one less gallon of gas....I mean come on, seriously?

Phatjam98
Phatjam98

@paranormalnut Oh, just in case my point was lost in that long statement. MS has in no way indicated that it will change Skype's business model, on in what ways they will change it for their purposes. However, MS is one of the smartest companies in the world, they will not do something to erode the user base as you seem to think they will do. Actually it seems you think they have already done it. LOL

Phatjam98
Phatjam98

@paranormalnut Ok if english is your second language I apologize I in no way want to bash you. But you make very little sense. What do you mean by, "If you know anything about Mac, they will drop it." You mean that if I know anything about Mac I should know that Mac will drop support for Skype? That makes no sense as Skype is a 3rd party software offering and has nothing to do with Mac's business model. If you are saying that Mac users will drop Skype because it is owned by MS that makes no sense either. When you talk about Sony or Apple having to pay MS for the use of Skype, that also makes no sense as they do not pay for the service now, and MS making them pay later would erode the user base Skype boasts... Which was the main reason MS bought Skype for over 8 bil. MS bought a user base and a technology. Mostly they bought the user base. The huge user base of Skype instantly makes MS a contender in the internet communications sector which they have been trying desperately to break into for years now. For example, Office, a MS product, is available for Mac. Sony wants to beat MS in competing markets, however in markets they are not in, they use MS just like any other company. Sony execs most likely use Office software, and while not all, most use Windows OS's. Again, not sure what you are talking about. But you clearly should not go into business.

snakes2solid
snakes2solid

i was messing with the idea of microsoft buying Sony..loll.... competition is better with more companies out there..but i'm just tired of psn network being down...my " down time" is with psn..so i'm frustrated!!!

paranormalnut
paranormalnut

@Phatjam98. Are you really that stupid? Where did I say I hate MS? Where? I only use PC in my house. In another peace of news I posted that I like PC better. Not that Mac sucks. I use Mac at work and thats about it.. Now if you were to ask Leo the tech guy he would say by a mac. But if mac was in the same spot MS was in, The computer world would suck. " If you anything about Mac, they will drop it." Sorry, I was on my windows phone typing that like I am now. " If you know anything about Mac, they will drop it." Better? Yes MS will let any one use Skype. Do you really think Sony or Mac like the fact that they will pay MS to use it? They will come up with something so they don't pay there comp.

paranormalnut
paranormalnut

[This message was deleted at the request of the original poster]

Draxargh
Draxargh

I just hope it doesn't effect the service as it currently stands, and it still receives support on other devices. I'm not worried about my Windows experience, but I am worried about my Android experience.

lamprey263
lamprey263

there goes almost half a year in profits

gameking5000
gameking5000

@blackace There are other people who use Microsoft products. Not just XBOX users

Phatjam98
Phatjam98

@Suisfonia Exactly. MS's purchase of Skype is just that, a company bought another company. MS will do exactly what makes the most business sense to them and that is to integrate the Skype tech into their other ventures while maintaining its user base. That means leaving the service fairly similar to what it is now. And yes, most people don't do research they just spout off about this and that, while ignoring the information that doesn't fit their point of view. Just have to ignore most people. Glad to see someone of intelligence in here. If we ever disagree on anything I'd be happy to debate you!

Phatjam98
Phatjam98

@paranormalnut And again, your next comment is again just non-sense. Ok we all get it, you hate MS, you don't like windows, you prefer a computer that you can only do specific things with like Apple's offerings. Is there an argument here or are you just spouting off about how much you love Apple?

Phatjam98
Phatjam98

@paranormalnut Your comment doesn't make sense, its all over the map and its only two sentences, I'm down to debate you about how I'm "Not very smart" but you have to make some sense. " It is blow to sony because if they want that support, they will now pay MS. Thats what I'm talking about. MS will let them use it but they are gonna pay them. If you anything about Mac, they will drop it." Seriously... what?

Phatjam98
Phatjam98

@Snaptrap That is not correct. Apple is the top capitalization company right now. However if you think that MS is only in business because of Windows you haven't done your homework. MS's entertainment division is making money, Office is the top selling Office suite in the world, It just bought Skype and we will have to wait to see where MS takes that, And MS has so many subsidiaries it would be impossible to name them here. Oh and Apple is number 1 with around 222.12 billion capitalization, MS is 2 with 219.18 Billion.... 3rd is IBM at 158.02 billion.... yup, MS is goin down soo fast! LOL

macartoon
macartoon

@szafto 1. This was not a bill gates move, this was a steve move, 2. He donates loads per year

tayunz
tayunz

@szafto Bill Gates is the last person you should get on for donating money. That guy donates tons of money. Plus, this is a Ballmer move not a Gates move.

blackace
blackace

Serious waste of money.They should have puchased SEGA and SquareEnix with that money. They over paid by at least $2-3 billion. The people who own Sykpe are dancing around in their office right now. Microsoft does stupid @#%$ sometimes. They could have produced at least 100 exclusives or more with that money.

szafto
szafto

why couldn't bill gates put 8.5$ billion to homeless people other than SKYPE!?

Deeze-Nutz
Deeze-Nutz

That's the end of cheap phone service using Skype. There is gmail (google E-mail) phone service which is still free for now. You have to pay for a phone number though.

DrKill09
DrKill09

Skype will soon be $60 a year. :roll:

thenephariouson
thenephariouson

@madmidnight, I understand where your coming from, and i gotta say, i kind of agree. In my mind, it would be far more beneficial for MS to approach EPIC with a view to a buyout (not that they would sell up), although the EPIC and MS partenership is a strong one, i just think they should have at least tried that avenue, in addition to the fact that MS would then recoup some costs due to the Unreal Engine Licensing. However i totally understand why they purchased Skype as there are so many different MS products which will potentially benefit (not all are games related). Regardless of what we think, only time will tell as to weather this was a fruifull purchase i guess.

Game-specialist
Game-specialist

Gr8.......easy now,not shutting off xbox to chat with some1 & running 2 ur laptop......thnx!! SONY!!

madmidnight
madmidnight

Too bad they didn't buy 8.5 billion dollars worth of first party companies. I wonder how much EA would have cost., ZeniMax (Bethesda ID ect.), or some great Japanese developers. I hope Microsoft knows what they are doing and can make some money on this project. And hopefully they will invest in their first party gaming divisions. Alan Wake 2 is coming, perhaps this year, so that is a great start.

TheHH
TheHH

I am not complaining on having skype on xbox live as long as it is free. but if they redesigned the software for the pc, i can just say bye bye skype good knowing u!!!!!!!!!!!!!!!!!!!!!

toz66
toz66

Well, as big as a story this is this week, I being the owner and host of one of the top UK gaming podcast's, cranky gamers UK, I'm worried to death if I'm being honest. Skype has actually been our choice of recording our cast for the last 3 years, and let me say flawlessly to, and like some of you have said here, what sense does it do for MS to buy this. It's going to go one of 2 ways in my opinion, either it gets integrated into Kinect/xbox, a bit like MSN chat, twitter and the like, and just sit there like the waste of time they are, or they will poke around with it on all fronts, and probably mess it up. One other thing really worries me though, we use a third party recording software with skype, how hard are MS going to make it for that kind of thing to still work. Also I know if a hell of a lot of independent podcast are going to be watching this very closely. So for me, as long as they leave it alone PC side, they can knock themselves out for me on Xbox, because just like most of the extra baggage on Xbox, it will not get used. Still weird purchase, for that kind of cash.

okassar
okassar

Some people are asking "Is Skype really worth that much?" Well, it isn't. Microsoft has a history of bad acquisitions and this isn't very surprising. Skype, unlike some of the past few companies they acquired (like the one that made the mega failure Kin phone), can actually be beneficial to Microsoft---just not at that price. Micrsoft overpayed. You would expect any company to be cautious with its money for the sake of maximizing profit (regardless of the size of the company), but sometimes that isn't true with Microsoft. It definitely has some elbow room with all that money. Edit: Gamespot should fix this formatting problem where sometimes I couldn't split blocks of text.

grungeman91
grungeman91

@Spacerac I ain't hatin', I'm just debatin'

Jdez15
Jdez15

BIG NEWS! Hopefully we can have chat and all of that.

Spacerac
Spacerac

@grungeman91 he actually is retired from Microsoft and is a full time philanthropist now. Hustle and you can be where he is instead of hatin'!

grungeman91
grungeman91

Great, More money to line Bill Gates' gold-plated pockets.

Sigil-otaku
Sigil-otaku

supernaught360 I agree, 8.5 billion worth of new games would have kicked any others consoles lineup out of the limelight. Skype as far as I am aware is just for talking to people online, why do they care so much?

aswer12_emo_00
aswer12_emo_00

Even though they said that they will invest in non microsoft platforms.... i'm pretty sure that they wont make skype available to the ps3

malverick
malverick

Microsoft hasn't actually purchased Skype yet...it's still to be approved by the regulators, and there may well be rules that Microsoft will need to follow before they're given approval - in this case, perhaps that the client software should always be available for non-microsoft devices and OSes. In terms of XBox Live, then yes, they will certainly make it part of the Gold subscription...they would want to make their money back from the acquisition; and obviously everything else they do that's worth while on the XBox is under Gold subscription. As a developer, I look forward to the fact that the protocol used by Skype may be opened up for use by others - Microsoft do like their API libraries. Of course, the Skype client will probably become Microsoft Skype Messenger, which will then be phased out and made part of LIve Messenger.

syam32245340
syam32245340

my impression was first oh! then ooh and then ooooh.....

warhawk-geeby
warhawk-geeby

@snakes2solid Microsoft would buy Sony but then unfortunately all us PS3 gamers would be left with zero AAA games, a child/family friendly focused console, and we'd have to pay for online.. Then again.. I think I'd rather pay for online connectivity then have none at all :P

supernaught360
supernaught360

Of all the things Microsoft could have spent 8.5 billion on, they choose Skype. Skype. They have nearly zero worthwhile first party games, and they spend 8.5 billion on... Skype. Attention Microsoft: you just made the entire world that much dumber.

DanteDelacoix
DanteDelacoix

oh dear.....this makes me think of when MSN messenger became Windows Live Messenger.....and look what happened to that....