May 10, 201115 yr Microsoft set to buy Skype for $8.5bn in biggest deal in history By Daily Mail Reporter Last updated at 5:55 PM on 10th May 2011 Comments (29) Add to My Stories Share Deal going ahead despite Skype making overall loss of $7million last year663 million registered on Skype but there are 124 million active users each monthMove sparks mixed reaction from Silicone ValleyMicrosoft shares fell by 1.87 per cent at time of opening Microsoft is on the verge of buying Skype for $8.5billion - despite the Internet phone service making a loss of $7million last year. The deal would be the biggest in the 36-year history of the world's largest software company. Microsoft has trailed Apple and Google in the mobile and Internet arenas. Despite doubling sales and profit in the last eight years, Microsoft's stock has mostly languished at the same level. Scroll down for video Deal: Microsoft, headed by Bill Gates, has agreed to buy Skype for a whacking $8.5billion - nearly $6billlion more than it was part sold for in 2009 It has left investors worried about its ability to counter new rivals or adapt to new ways of computing. Skype was formed in 2003 in Luxembourg and originally sold to eBay in 2005 for $3.1 billion. At the time, it was thought that Skype calls could be used in auctions by bidders or sellers but the idea never materialised. In fact even though Skype kept growing - who doesn't like phone calls for free? - it didn't make the money to go with the growth. Profit: Skype founders Niklas Zennstrom, left, and Janus Friis, right, stand to benefit from the deal after re-investing in Skype when it was sold by eBay in 2009 By 2009 eBay had had enough and sold 70 per cent of Skype to a consortium of investors for $2.75billion. It retained about 30 per cent however. Microsoft already has Windows Live Messenger, which offers free, instant messaging, plus voice and video chat. It is not currently available on Windows Phone 7 software however. Messenger currently has around 330million active users each month, with around 40million online at any one time. MICROSOFT - IN NUMBERS 1975 Microsoft founded$217.82billion market cap worth$68.62billion turn over last year$50.09billion pre-tax profit last year-10.75 per cent share price drop over last year350million Windows 7 licenses sold to date SKYPE - IN NUMBERS 2003 Skype founded663 million registered users$860m revenues last year and an operating profit of $264million$7million lost last year overall$686million long-term debt207billion minutes of voice and video conversations in 2010 Brand building: Microsoft want Skype to enhance its current tools to provide a seamless tie up for the way users communicate in both their business and personal lives In contrast Skype is a lot smaller. Although 663million people are registered on Skype it has 124million active users each month and typically 20 to 30million users online at any one time. Most of its services are free as calls are made between computers or in some cases internet-enabled phones. But there are also around 8million Skype users who pay for the service - a key difference between the two services. For consumers Skype will support Microsoft devices like Xbox and Kinect, according to a statement issued by Skype today. The move could make for an interactive gaming experience that would link up players across the world. But not just that it could also be beneficial to the whole family for home schooling, one-on-one training and even patient care delivered remotely. Skype is also available on multi-platforms, meaning it can reach into the world of Apple and can be paired with Windows Phone 7. Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities but will also continue to invest in and support Skype clients on non-Microsoft platforms. Skype is a great brand and has arguably better functionality than Messenger, but its profits are on shaky ground. It recorded an overall loss of $7million last year. Small in comparison: Although 663million people are registered on Skype it has 124million active users each month and typically 20 to 30million users online at any one time Last week rumours were circulating that Google and Facebook were sniffing round in a potential deal with Skype which could have influenced Microsoft's decision. But according to a TechCrunch source Google came in second allegedly bidding just $4billion for Skype - less than half of what Microsoft forked out for it. But to put it in perspective the $8.5billion paid out is just 17 per cent of the cash Microsoft had on their balance sheet at the end of the last quarter. There has been mixed reaction from Silicone Valley about the shock move. SKYPE - A HISTORY Jan 2003: Entrepreneurs Niklas Zennstrom and Janus Friis come up with the concept of Skype. Apr 2003: Skype is launched in beta but the first version was rough to say the least. Calls dropped and voice quality was shaky. Oct 2005: eBay buys Skype for $3.1billion - not bad for a two-year-old start up. Jan 2006: Skype adds video calling. Apr 2009: Skype keeps expanding but doesn't make enough money. eBay has enough and suggests it wants to offer Skype on a initial public offering. Sep 2009: eBay announces sale of 65 per cent of Skype to a group of Index Ventures and Silver Lake Partners. Nov 2009: The sale of 70 per cent of Skype is completed valuing the business at $2.75billion. The new owners include: Silver Lake Partners, CPPIB, Andreessen Horowitz...and the original founders. eBay retains approximately 30 per cent equity investment in Skype. Aug 2010: Skype files to do an IPO but it doesn't happen. Jan 2011: It tries to file an IPO again in January. May 2011: Microsoft buys Skype for $8.5billion. Leif-Olof Wallin, research vice president at IT research and advisory firm, Gartner, said: 'We think this is a positive thing for Microsoft. Skype is a very powerful brand with a huge install base. While Michael Clendenin, managing director of research and advisory firm, RedTech Advisors, said: 'In this atmosphere of Internet Bubble 2.0, picking up an unprofitable online company for roughly 10 times sales probably seems downright cheap... 'But if you consider (Skype) was just valued at about $2.5billion 18 months ago when a chunk was sold off, then $8.5billion seems generous and means Microsoft has a high wall to climb to prove to investors that Skype is a necessary linchpin for the company's online and mobile strategy.' At yesterday's close Microsoft' share price was $25.83 per share. At opening this morning it had fallen 1.87 per cent to $25.37 per share. It makes money on voicemail services and calls to landlines or mobile numbers. Microsoft's most high profile Internet purchase was the $240million it paid for a 1.6 per cent share in Facebook in 2007. Bill Gates's company has also invested in the MSN Internet portal and Bing search engine, racking up $7billion in losses in the last four years. Apple's FaceTime video-calling service - available on its latest iPhone and Mac computers - has been a big hit with consumers. More... My yacht's bigger than yours! Battle of boats as billionaire Roman Abramovich is put in his place by Microsoft boss's larger vessel Google recently followed suit by adding video to its popular Google Talk application for smartphones. The deal is relatively small for Microsoft, which has $50billion in cash and short-term investments on its balance sheet. 'I think the price is quite reasonable,' said Sean Lee, a Taipei-based manager of the Global Top Dividend Fund at Shinkong Investment Trust, which owns Microsoft shares. Skype had recently been looking at other options including tie-ups with Facebook and Google. Microsoft and Skype declined comment. Read more: http://www.dailymail.co.uk/news/worldnews/article-1385472/Microsoft-buy-internet-phone-service-Skype-8-5bn.html#ixzz1LyGvWYsB
May 10, 201115 yr very good purchase from Microsoft, surprised google didn't buy the 70% from eBay a while back. It can only get stronger now its linked in to Nokia. Death to "free minutes"!
May 11, 201115 yr I barely know anyone who is going to keep using Skype after it was announced they were gonna charge for it.
May 11, 201115 yr Author They've already announced that its turning into a pay service? No, I think that's just "Skype".:rolleyes:
May 11, 201115 yr They've already announced that its turning into a pay service?It's already a pay service, from Skype to handset, or between two people who don't both have Skype. But only about 9 million of Skype's 145 million users pay for use. Where I see this benefitting users is improving the service of Skype apps built into handsets that also incorporate Windows7 and the future generation of OS. They'll make good money out of this by bundling Skype into all Microsoft products under the sun, with more advertising etc.
May 11, 201115 yr Author It's already a pay service, from Skype to handset, or between two people who don't both have Skype. Where I see this benefitting users is improving the service of Skype apps built into handsets that also incorporate Windows7 and the future generation of OS. In other words, the Skype's the limit?:P
May 11, 201115 yr It's already a pay service, from Skype to handset, or between two people who don't both have Skype. But only about 9 million of Skype's 145 million users pay for use. No no no no - ergh. I meant Skype to Skype, wasn't sure what "pay" part Sara was referring to
May 11, 201115 yr ah in that case I haven't read your and sara's source, all the information I can find say that Microsoft haven't decided if any skype to skype charges will be levied.
May 11, 201115 yr I hope they don't start charging anything for Skype to Skype calls anytime soon or else my mother will start bugging me on MSN too. :sick:
May 11, 201115 yr If they do it's a good way to alienate 136m active users in one foul swoop :laugh3: They have bad debts associated with Skype now, so they're going to have to pay for them somehow. I've heard skype being linked into Kinect and Xbox etc and bundled in as apps with phones etc but I have my doubts that that will even generate enough money to scratch the surface.
May 11, 201115 yr Author If they charge, everyone will start using an alternative service, so it'll be pointless.
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