Microsoft to Buy Skype for $8.5 Billion?

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Image Credit: Skype

Apparently Skype is up for sale to the highest bidder.  Chatter around the net had foreseen a possible purchase by the Facebook empire, but according to the Wall Street Journal, Microsoft will most likely come out as top dog in a $8.5 billion deal that may finalize as early as Tuesday afternoon.  If the paint dries on this Picasso of an acquisition it will be Microsoft’s largest in the company’s 36 year old history.  Microsoft Chief Executive Steve Ballmer hopes the deal will pay off as part of their push to take on competitors Apple and Google who currently hold a large share of the reins behind Internet technologies.  Google alone claims 65% more of U.S. searches than Microsoft’s engine Bing.

As popular a VoIP service as Skype is, with a staggering number of over 663 million registered users internationally, several companies have played pass-the-potato in regards to ownership of the service.  eBay is most likely the most memorable buyer that obtained the company for $2.6 billion in cash and stock in 2005, and then later turned over a whopping 70% to private investors in 2009, after its vision to utilize the service to connect buyers and sellers easier had plummeted.  Why the eagerness to let go of this leader in VoIP communications you ask?  The hard to swallow truth in the matter is that Skype has not been netting a comfortable profit ever since its inception.  Not only did the company experience a $7 million loss during the past year but it has been in $686 million in long-term debt alone.

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The money problems are not just limited to Skype’s end though.  Microsoft took on some ambitious ventures like paying the lucrative amount of $6 million to the advertising company aQuantive Inc, and nearly signing the dotted line to obtain Yahoo for $48 billion, only to back out at the last minute after second thoughts.  While this investment may prove to be wiser than the aforementioned ones, it could possibly be too little too late.  Google’s own VoIP program of Google Voice is already well on its way to cornering the market and winning some Skype converts with its competitive international rates and guaranteed free calling to any landline number within the U.S. until the end of 2011.

It is with Microsoft’s strategy of integration where this daring deal might pay off.  Though Microsoft has spent some time planning to give the red carpet treatment to its VoIP client Lync in gaming peripherals like Kinect, acquiring a familiar name like Skype, will perhaps help this process to be even more seamless.  Gaming is not an arena that Google has really stepped into yet and therefore Microsoft could use this technology to put them ahead of any effort that Google attempts in the future.  At the end of the day though, Microsoft is the most overt contender in this game of catchup.

Do you think the company will succeed?

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