Microsoft Corp plans to buy Internet phone service Skype for $8.5 billion in its biggest-ever acquisition, placing a rich bet on mobile and the Internet to try to best rivals such as Google Inc.
In a deal that took a month from offer to signing, the software company outbid Google and Facebook, which sources said offered to partner or buy Skype for $3 billion to $4 billion.
Microsoft’s interest in the money-losing, but popular service highlights a need to gain new customers for its Windows and Office software. Skype has 145 million users on average each month and has gained favor among small business users.
Led by private equity firm Silver Lake, eBay Inc and other investors including the Canada Pension Plan Investment Board and Andreessen Horowitz, would make $5 billion, or three times their investment, a source familiar with the deal said.
Microsoft is putting more energy and resources into mobile and the Internet as the personal computer business underpinning its Windows and Office franchise appears to be under threat.
The Luxembourg-based company, which allows people to make calls at no charge, but has also developed premium services, would give Microsoft a foothold in the video-conferencing market as businesses shift to cheaper ways of communicating.
Skype delayed plans for an IPO that was expected to value the company at more than $3 billion. It looked tie-ups with Facebook and Google. Such a deal was expected to value Skype at $3 billion to $4 billion.
"It doesn’t make sense at all as a financial investment," said Forrester Research analyst Andrew Bartels. "There’s no way Microsoft is going to generate enough revenue and profit from Skype to compensate."
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