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Microsoft To Buy Skype For $8.5 Billion

CEO Steve Ballmer emphasized the value of Skype integration with Microsoft Lync unified communications, Outlook, consumer products like Xbox, and other online communities.

Microsoft is acquiring Skype for $8.5 billion in cash, a deal Microsoft CEO Steve Ballmer said will enrich Internet voice and video communications for both consumers and business users.

"Anytime, around the planet, people talk about communications, they talk about Skype," Ballmer said in a news conference Tuesday, noting that Skype has "become a verb" that means to place a voice or video call over the Internet.

Microsoft pledged to continue to invest in and support Skype clients on non-Microsoft platforms, but emphasized the value of integrations with Microsoft Lync unified communications, Outlook, and consumer products like Xbox, Kinect, Xbox Live, and other online communities. Ballmer assured those who might be mistrustful of Microsoft operating system bias that Skype interoperability is in his company's best interest.

"We obviously love Windows and love Windows Phone, love the Xbox, and we're going to do a lot of work together. But fundamental to the value proposition of communication is being able to reach everybody, whether they happen to be on your device or not," Ballmer said. "The products Skype users know and love today will simply continue to grow and be enhanced."

Microsoft also sees great potential to create new experiences on phones and in living rooms through its consumer initiatives, while strengthening professional communications through integration with Lync and Outlook, Ballmer said. Because people work from home and conduct parts of their personal lives from work, the ability to bridge between commercial and consumer communications also is important, he said. "It enables communication in all of people's lives."

Skype will become a new business division within Microsoft, with Skype CEO Tony Bates as its president, reporting directly to Ballmer. Microsoft said it hoped to obtain all regulatory approvals and close the acquisition by the end of the year.

Rumors of a major acquisition or partnership involving Skype had been circulating for the past week, originally revolving around talks with Google and Facebook, which Reuters reported to be the leading suitors. GigaOm's Om Malik reported Sunday that Microsoft had entered the bidding. But Ballmer said the purchase price was set in mid-April, even though the agreement was only signed Monday night.

Asked at the press conference whether Skype had in fact been courted by other companies, Bates sidestepped the question, referring only to the unsolicited offer from Microsoft that his board ultimately accepted.

Malik, who had previously advocated for a Facebook/Skype combination, blogged that Facebook gets the best of both worlds by having Skype acquired by Microsoft, which is an investor in and partner of Facebook, rather than having to fund an acquisition itself. The deal also keeps Skype out of the hands of Google, a more contentious competitor.

Faisal Hoque, founder of Business Technology Management and author of the forthcoming book The Power of Convergence, said that despite having its own Internet voice and video products, such as those built into Lync, Microsoft benefits from acquiring the Skype brand and technology. "It's the same reason why you use Google versus Bing--it's a much more popular environment," he said. "I think people are more inclined to have both internally and externally focused communications over Skype."

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