Belfast Telegraph

Microsoft confirms $8.5bn Skype takeover deal

By Jamie Grierson

Microsoft has confirmed it will buy internet phone service Skype for $8.5bn (£5bn) in the software giant's biggest ever takeover deal.

Luxembourg-based Skype, which allows its 663m users to make voice or video calls over the internet, will become a new business division within Microsoft after its private owners agreed to sell the business.

The hefty price tag is likely to raise eyebrows as Skype's former owner, online auctioneer eBay, sold 70% of the reportedly loss-making business for $2bn (£1.2bn) just two years ago.

The value of the deal overtakes Microsoft's successful bid for the online advertising agency aQuantive - now Microsoft advertising - in 2007 for $6bn (£3.6 bn).

Skype is popular with users because of its free calling services, which can be made to other Skype users, and the service has around 8.8m paying customers per month.

The amount of call time on Skype's network totalled 207bn minutes last year.

The popularity of the free calls has made it difficult for the company to make much of a profit since it was founded by entrepreneurs Niklas Sennstrom and Janus Friis.

City analysts earlier questioned the size of the bid price as the company made a $7m (£4.2m) loss last year on revenues of $860m (£525m).

A Skype sale has been speculated upon for weeks, with Google and Facebook also rumoured to be interested.

Skype was bought by eBay for $2.6bn (£1.5bn) in 2005 but it sold a 70% stake to private equity firms Silver Lake and Andreessen Horowitz for $2bn (£1.2bn).

Other major shareholders include tech-firm Joltid and the Canada Pension Plan Investment Board.