Microsoft Buying Skype in $8.5B Deal

Microsoft announced on Tuesday that it has struck a deal to buy Skype for US$8.5 billion in cash. The announcement comes on the heals of rumors that Facebook and Microsoft were courting the online chat and communications company.

Microsoft and SkypeMicrosoft plans to buy Skype

The deal has been approved by the boards of directors for both companies and finally lets eBay offload the rest of Skype. eBay paid some $2.6 billion for Skype back in 2005 raising questions about why an online auction company would want an Internet chat company.

eBay sold off 65 percent of Skype in 2009 to Silver Lake Investment, which just so happens to be the same firm that’s backing Microsoft’s purchase.

Once the deal is complete, Microsoft will have access to new communication tools it can roll into its own products such as the Xbox 360 and Messenger. According to the company, “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.”

Skype CEO will report to Microsoft CEO Steve Ballmer as president of the Microsoft Skype Division.

The deal still needs to jump through the usual regulatory hurdles, but Microsoft expects to finish the purchase process by the end of 2011.