Microsoft close to US$7-8 billion Skype deal

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A week has barely passed since news broke that internet telephony company Skype was potentially up for sale. Today those rumours were bolstered with the news that Microsoft is vying for the keys to the Skype offices.

The Wall Street Journal reports that Microsoft, the oldest of all the tech giants is planning to buy Skype for a staggering US$7 to US$8 billion.

The Wall Street Journal states – but cautions against believing – and other reports confirm that not only is Microsoft “in talks” to buy Skype but the deal has been concluded and an announcement will be made at some point during today’s business day (US time). The Wall Street Journal report is however far more circumspect citing “people familiar with the matter”, who say that negotiations are not yet concluded and could fall through.

These reports come hot on the heels of news that Facebook was looking to acquire Skype for an undisclosed sum or enter into a partnership deal with the internet telephone company. However those reports also stated, Skype remained, “in strategic discussions with other companies”.

If the deal is confirmed, this would be the largest acquisition deal that Microsoft has concluded in its 36 year history.

According the Wall Street Journal, Microsoft has traditionally been shy of making big purchases, a view also informed by the opinion held by many of Microsoft’s current and previous executives that the Washington state based software giant overpaid for online advertising firm aQuintive in 2007, which was acquired for US$6 billion.

Should the reports prove to be true, it would signify that Microsoft — despite the company’s to date lacklustre performance in the sector — still see the online sector as a serious business avenue.

Just as when earlier this year it was seen as a shot across the bow in a coming battle between the two tech titans after Microsoft joined an anti-trust complaint against the search giant in Europe, another view on this acquisition — should it go through — would be that the much rumoured looming battle between Google and Microsoft beyond the realm of search engines is coming even closer.

The move could also be seen as part of Microsoft’s aggressive strategy to return to a leading role in the mobile market against current leaders Apple and Google. This strategy has already seen Microsoft partner with Nokia in a move that has already led to predictions that Nokia could return to its former leading role as a handset provider. The Skype deal, the Wall Street Journal says “could give consumers a way to make cheap phone calls over the Internet from mobile phones, without paying higher rates to the carriers.”

Skype, launched in 2003 by Estonian software developers, now based in Luxembourg and part owned by US online shopping and web-auction giant eBay, has had a chequered business past. Though in August of last year, Skype filed papers to go public, those plans were placed on hold, after Tony Bates was hired as the new chief executive. What these latest reports mean for those plans, is unclear.

Update
Microsoft, as was expected has announced that they have entered into a “definitive agreement under which Microsoft Corp. will acquire Skype S.A” for US$8.5 billion. A press conference will be held and streamed live at 8am EDT (Eastern Daylight Time).

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