Microsoft agrees $8.5bn deal to buy VoIP giant Skype

Microsoft has confirmed that it will buy Skype in an $8.5bn deal which will see the VoIP firm's technology supporting Microsoft devices like Xbox and Windows Phone and integrating with services including Lync, Outlook and Xbox Live.

The deal, which had been widely rumoured since late on Monday, has been approved by both boards and will benefit consumers and enterprises, according to Microsoft.

"By brining together the best of Microsoft and Skype we'll empower people with new technologies which should bring them closer together," said Microsoft chief executive Steve Ballmer during a webcast to announce the deal.

"Anytime people talk about communications they talk about Skype. Clearly it has built innovative products with global scale and the number of users are rapidly accelerating."

Skype will become a separate business division within Microsoft, and the VoIP firm's chief executive, Tony Bates, will become president of the Microsoft Skype Division.

The companies were typically short on detail, with Ballmer merely saying that Skype will support devices such as Xbox and Windows Phone and that the company will connect Skype users with Lync, Outlook, Xbox Live and other communities.

"For businesses there has been an incredible uptake of our Lync unified communications client and we're committed and want to build on that success," he explained.

"We plan to enhance it in addition to connecting with the rest of the Skype customer base."

Skype will be hoping that the marriage is happier than its last major acquisition, by auction firm eBay, which ended in tears four years later.

For its part, Microsoft has said that it will continue to support Skype clients on non-Microsoft platforms.

Fred Huet, managing director at telecoms and media consultancy Greenwich Consulting, suggested that Skype's technologies will enrich Microsoft Live in a way that the firm has not yet been able to achieve.

"The fact that it is a technology deal is something which Microsoft will be very comfortable with," he said.

"Most significantly, Microsoft will be able to leverage its strong business presence and repackage it - while improving the QoS to business grade - into its core business package, thereby competing with VoIP manufacturers such as Cisco and Alcatel-Lucent.

"It is exciting to think about potential technology integration between Microsoft Windows and Skype services, but this will undoubtedly raise competition concerns, and Microsoft will have to see in detail how to integrate this into its mobile offering and its deal with Nokia."

Richard Ellis, director at consultancy 2e2, argued that the deal may have some interesting business connotations.

"Many organisations, despite having Microsoft on the desktop, currently use Skype as their messaging/VoIP client so looking ahead I can envisage much tighter integration with desktop applications such as Office," he said.

"On the flip side, those organisations that have been reticent to allow employee usage of Skype due to security concerns may now start to reconsider their stance once it comes under the Microsoft banner."

Andreas Wienold, European vice president of sales at videoconferencing firm LifeSize, argued the deal could significantly impact the way people communicate within businesses.

"The deal is also further evidence of Skype moving towards a stronger business focus and will guarantee improved stability, interoperability and cost effectiveness of their services for users," he added. 

"Skype are clearly serious about increasing their play in this [video conferencing] market. Interoperability is fast becoming the litmus test for businesses shopping for enterprise video conferencing and telepresence vendors."