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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.

Skype will support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices, and Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities. Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms.

Founded in 2003, Skype was acquired by eBay in September 2005, and then acquired by an investment group led by Silver Lake in November 2009. Microsoft said it was impressed by Skype's progress in the last 18 months, which included increasing monthly calling minutes by 150% and developing new revenue streams and strategic partnerships. Video traffic has been particularly growing and now represents 40% of all Skype calls, according to Microsoft.

Ballmer and Bates particularly emphasized the potential of expanding the use of Skype on mobile phones and television sets. Bates said the core asset Skype brings to Microsoft "is being able to create a very engaged user base."

How will a Microsoft acquisition affect those Skype customers? Gartner analyst Bern Elliott said he expects Microsoft will want to retain them. "I don't want to say it's positive, but I don't think it's negative," he said.

Microsoft sees "multiple synergy areas" in the acquisition, including improved voice and video for users of the Microsoft Lync unified communications platform, Elliott said. Through integration with Skype, Microsoft will be able to better serve voice and video connections between enterprises and business partners that are not necessarily on the same communications platform, he said. Skype can also be more tightly integrated with enterprise directory services, he said.

Microsoft also will get the benefit of the partnerships Skype has established with enterprise players in Internet call trunking, Elliott said.

"If this is going to good, and the acquisition is going to be work, then I think the benefits will be more to Microsoft than to Skype," said Steve Hilton, head of enterprise research at Analysys Mason. "I don't think Microsoft has done a great job over the years with voice communication. They've had a bunch of fits and starts." Adding Skype ought to be beneficial for Microsoft Lync users and for the broader Microsoft communications strategy.

Meanwhile, Skype will benefit from a larger developer community and better integration with enterprise technologies, Hilton said. Even though Skype has tried to break into the enterprise market, it does not understand enterprise needs, he said. "Skype may have something to learn from Microsoft on that front."

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