Microsoft Buys Skype for $8.5 Billion

The Internet phone company's CEO, Tony Bates, will stay on

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Microsoft announced this morning that it will buy the Internet phone company Skype for $8.5 billion, with current Skype CEO Tony Bates continuing to run Skype as a business unit within Microsoft reporting to Microsoft CEO Steve Ballmer. The Wall Street Journal first reported on Monday night that a deal was near and All Things Digital confirmed the report, following GigaOM's scoop that Skype may have been talking to Microsoft in addition to Google and Facebook.

Overnight coverage suggests discussion of the deal will go in several different directions as the day progresses. First, there's the question of the price tag. Erick Schonfeld at TechCrunch, for example, thinks Microsoft, "desperate for a legitimate Internet business beyond Bing," is overpaying for a company that "still hasn't figured out how to turn 663 million users into a profit machine."

As for what this might mean for consumers, ReadWriteWeb and GeekWire predict Skype will soon migrate from PCs to cell phones and living rooms given Microsoft's mobile expertise and Xbox 360 Kinect sensors, which connect cameras to TV screens. And then there's the question of what this all means for Microsoft. The New York Times points out that the Skype acquisition is Microsoft's largest ever, and that it can help Microsoft "gain a foothold in the world of voice and video communications." Microsoft could integrate Skype into Office to help business users collaborate, the Times points out, and it could help Bing compete with Google's search engine and Microsoft's mobile operating system compete with Apple's iOS and Google's Android systems. As Om Malik writes at GigaOM, "The software giant needs a competitive offering to Google Voice and Apple's emerging communication platform, Facetime."

As Paul Kedrosky points out, the Internet, inevitably, has wasted no time in greeting the news with another response: Microsoft/Skype anagrams.

This article is from the archive of our partner The Wire.