Microsoft Completes Skype Acquisition

Skype is now a new business division within Microsoft, after Redmond officially closed its $8.5 billion (£5.4bn) acquisition of the popular VoIP service provider.

The deal was first announced back in early May this year, but since that period Redmond and Skype have had to jump through a number of regulatory hoops. One of the most important was the approval of the US Federal Trade Commission, which cleared the deal in June.

The FTC felt that there was sufficient competition from rival online services such as Google Talk to permit the deal to go ahead. And earlier this month Microsoft was able to clear one of the last remaining regulatory hurdles in the way of finalising the deal, when it gained European approval.

Deal Concerns

The regulatory approval comes despite concerns that Microsoft will end up bundling Skype’s software with Windows on new PCs, potentially damaging competition in the market. Indeed, Microsoft has employed this tactic in the past with Internet Explorer, giving the company a disproportionate share of the browser market.

However it has always seemed likely that the deal would go ahead provided it could pass the regulatory issues, as both the board of directors at Microsoft and Skype had endorsed the acquisition.

Under the terms of the deal, Skype CEO Tony Bates has been appointed as president of Microsoft’s Skype division, reporting directly to Ballmer. But other members of his management team are not so fortunate, when it emerged that Skype was terminating the services of a number of senior level executives.

Product Strategy

It is thought that Skype’s services will be meshed with a variety of products in Microsoft’s portfolio, including its Lync unified communications platform, Outlook, and Xbox Live.

Microsoft shed a little light on the subject in a statement.

“The Skype division will continue to offer its current products to millions of users globally,” it said. “Longer term, Skype will also be integrated across an array of Microsoft products to broaden Skype’s reach and accelerate its growth as a fundamental way people communicate online.”

It also added that Skype employees will remain located in their global offices, including Estonia, the Czech Republic, Russia, Sweden, the UK, Luxembourg, Japan, Singapore, Hong Kong, and the United States.

One Billion Goal

“By bringing together the best of Microsoft and the best of Skype, we are committed to empowering consumers and businesses around the globe to connect in new ways,” said Bates. “Together, we will be able to accelerate Skype’s goal to reach 1 billion users daily.”

“Skype is a phenomenal product and brand that is loved by hundreds of millions of people around the world,” said Microsoft CEO Steve Ballmer. “We look forward to working with the Skype team to create new ways for people to stay connected to family, friends, clients and colleagues – anytime, anywhere.”

Microsoft’s acquisition of Skype came despite reports that both Google and Facebook were  interested in buying it. Skype investigated a flotation earlier this year, which was estimated to be worth around $1 billion (£633m).

Skype was previously owned by online shopping website eBay, before the Internet telephony unit was sold to investors including Silver Lake and Marc Andreessen in 2009.