Microsoft will acquire Skype for $8.5 billion in a move that is the biggest acquisition of the company's history.
"Microsoft Chief Executive Steve Ballmer, though, sees the Internet as an essential battleground for Microsoft, a company that still makes the vast bulk of its profits from Windows and Office software systems. Investors have become increasingly concerned about Microsoft's ability to squeeze continued growth out of those businesses, as rival technologies from Apple Inc., Google and others put more pressure on profits," the Wall Street Journal reported.
As Microsoft pushes into cloud technology, Skype will be a valuable tool. As the WSJ noted, Microsoft has not had a major brand purchase in some time and Skype, which was founded in 2003, is a major name in the online space with its VOIP services.
GigaOM first broke the story and confirmed the deal has been done, adding that Facebook may be the biggest benefactor of the deal.
"The biggest winner of this deal could actually be Facebook. The Palo Alto-based social networking giant had little or no chance of buying Skype. Had it been public, it would have been a different story. With Microsoft, it gets the best of both worlds -- it gets access to Skype assets (Microsoft is an investor in Facebook) and it gets to keep Skype away from Google.
Facebook needs Skype badly. Among other things, it needs to use Skype's peer-to-peer network to offer video and voice services to the users of Facebook Chat. If the company had to use conventional methods and offer voice and video service to its 600 million plus customers, the cost and overhead of operating the infrastructure would be prohibitive.
Facebook can also help Skype get more customers for its SkypeOut service, and it can have folks use Facebook Credits to pay for Skype minutes. Skype and Facebook are working on a joint announcement and you can expect it shortly."
How this all plays out will be worth watching.
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