Microsoft Completes Skype Purchase

Microsoft and Skype are now one company. The Redmond, Washington-based technology giant completed its acquisition Friday of the once-upstart, Internet-based communications company.

In a posting on The Official Microsoft Blog, Tony Bates, the former Skype CEO who is now head of the new Skype division, said the deal-closing "represents a huge leap forward in Skype's mission to be the communications choice for a billion people every day."

Bates said Skype's position would be at "the intersection of social, mobile and video communications." He added that the company's goal was "to transform communications," which meshes with Microsoft's goal of creating "communication across every device and every platform."

In a video message, Bates said both Skype and Microsoft are "disruptive, innovative, software-oriented companies." The envisioned world is one of "complete, pervasive video communications, something that's across all parts of your life."

In May, Microsoft said it intended to buy Skype for $8.5 billion. Last week, Microsoft cleared its last major regulatory hurdle when the European Commission approved the purchase.

One of the questions had been whether Microsoft would hinder Skype's interoperability with other companies, or if it would integrate Skype with its widespread Windows operating system, creating market advantages others could not match.

On the first matter, the commission found that Microsoft would have no incentive to diminish Skype's interoperability, since it's to the advantage of the Skype brand that it be available via as many partners and platforms as possible.

Concerning whether Microsoft could integrate Skype with Windows, as it had been accused of doing with its Internet Explorer browser, the commission reasoned that most users could readily download a version of Skype if they wanted, and that most users who buy a PC with Skype installed were already registered Skype users.

Video is a growing part of communications, and of Skype. According to statistics released recently by Microsoft, about 42 percent of all Skype-to-Skype minutes were video calls, and there were 1.8 billion hours of Skype video calls made in the year ending in August.

Skype was founded in 2003 by Niklas Zennstrom and Janus Friis, and it has about 124 million registered users. It is the largest Internet communications company, but has had difficulty being profitable. eBay bought the company in 2005 for an estimated $2.6 billion, but then sold it to an investor group last fall for an estimated $2 billion.

Microsoft to buy Internet phone company Skype

US software giant Microsoft is all set to buy the Internet phone company Skype for $8.5 billion in cash as it battles to stay relevant in an online world dominated by Google and Apple.

Buying Skype is giving Microsoft Corp. a potentially valuable communications tool as it tries to make a bigger splash on the Internet and become a bigger force in the increasingly important smartphone market.

Skype boasts about 663 million users worldwide who make voice and video calls over the Internet.

Microsoft chief executive Steve Ballmer reportedly championed the deal, which was estimated to have a price tag of $8.5 billion in what would be the decades-old technology company's most expensive acquisition to date.

Skype was launched in 2003 by Estonian software developers who were part of the group that created peer-to-peer file-sharing service Kazaa.

Millions of people use Skype to make low cost or free phone calls over the Internet using their computers or smartphones.

Buying Skype could be a way for Microsoft to shed some of its business software image and gain momentum in a hot smartphone market at a time when Internet lifestyles are going mobile.

Skype in January closed a deal to buy Qik, a California startup that specializes in allowing people to use smartphones to stream video to Internet-linked friends in real time.

The acquisition came amid surging popularity of video chat using smartphones, tablets and desktop computers.

Skype handled 24.7 percent of all minutes spent on international phone calls last year and 40 percent of calls between Skype users were video, Skype chief executive Tony Bates said while announcing the Qik takeover.

Bates said Skype was also continuing its push into living rooms, expanding a line of televisions embedded with its Internet telephony service and even infusing the software in a Blu-ray player made by Panasonic.

Online auction giant eBay in 2009 sold most of its stake in Skype to an investment group that includes the two founders of the Web communications company. That deal valued Skype at $2.75 billion.

The firm, which has its headquarters in Luxembourg, bypasses the standard telephone network by channeling voice and video calls over the Internet.

It allows users to call others free of charge and provides the ability to connect with land lines or mobile devices at low rates.

Skype last year announced plans for an initial public offering of stock and appeared on its way to profitability, but investors are evidently eager for a pay-off.

Vaunted technology blogger Om Malik wrote that Facebook could benefit greatly from Microsoft buying Skype. Microsoft owns a minor share of Facebook and powers Internet searches at the social networking service.

Facebook members would likely get access to Skype tools while Microsoft keeps the telephony service out of the hands of competitor Google, Malik said.

A Skype version 5.0 for Windows unveiled in October included a Facebook tab and integrated Facebook's news feed and phonebook into the Internet communications service.

A Skype buy could also play into Microsoft's efforts to promote its new Windows Phone 7 mobile software in a fierce smartphone market.

Microsoft joined forces in February with Nokia, the world's largest mobile phone maker. In an effort to radically change course and fight off encroaching competition, Nokia smartphones will be powered by Microsoft software, according to Nokia chief executive Stephen Elop.