Services & Software

Microsoft to buy Skype for mindboggling $8.5bn

Microsoft is tucking its napkin into its collar and sharpening the cutlery as it prepares to gobble up tasty Internet phone company Skype. It's a pricey dish, though...

Microsoft is hovering over the buy button on Internet phone giant Skype, with the price tag a honking great $8.5bn (£5.2bn), according to The Wall Street Journal. It would be Redmond's biggest ever deal.

Skype lets you make video and voice calls over the Net for free, or for a fee if the call is to a landline or mobile. An average of 124 million people use it every month -- 25 million people are signed into it at any one time -- and it's this huge, loyal user base that Microsoft is buying, rather than any revenue stream.

The deal has yet to be finalised, the WSJ's sources warn, but it could be announced as soon as today. It will include $686m in debt. Skype made $860m in revenue last year, but still lost $7m.

While Skype has rarely made any profit since its launch in 2003, its brand and underlying tech could prove extremely valuable in Microsoft's attempts to gain users for its online and particularly mobile services. We can't imagine phone networks -- which Microsoft needs to stock Windows Phone 7 handsets -- being too happy with the company offering cheap calls, however.

eBay bought Skype in 2005 for a then-astonishing $2.6bn, an acquisition that made absolutely no sense at all. The online auction site flogged 70 per cent of Skype to eagle-eyed tech investors in 2009, who now stand to make a huge return. eBay will probably just about make its money back.

Rupert Murdoch sued Skype in August last year for using three of the same letters as his company Sky. That doesn't have anything to do with Microsoft buying it -- we just like to remind you what an insufferable old hobgoblin that man is.