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Why did Microsoft buy Skype for $8.5 billion?



Microsoft has purchased Skype, the world’s largest international calling company, for a hefty $8.5 billion. The deal - Microsoft's most expensive acquisition - also snatched Skype out of the hands of other potential suitors, which reportedly included Google and Facebook. The acquisition, Microsoft’s biggest in its 36-year history, was made before Skype could release an initial public offering, according to USA Today.

Skype, based in Luxembourg, offers free voice and video communications over the Internet, a popular alternative to standard telephone calls, especially over long distances. It was created in 2003 by Niklas Zennstrom and Janus Friis, the software developers who also created the file-sharing network Kazaa. They sold Skype in 2006 to San Jose's eBay Inc. for $2.6 billion.

The initial public reaction was WHY? Why would Microsoft buy Skype considering the company incurred a net loss of $7 million last year on revenue of $860 million?

Obviously, Skype brings Microsoft a large customer base - more than 660 million registered members worldwide, including 107 million who use the service at least once a month. Those users log in for about 100 minutes each per month, together more and moue companies will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world.

Microsoft intends to make Skype support its 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. The acquisition will automatically put Microsoft in line with Google, Apple and Facebook video chat services.

With social networking getting more and more popular and devices embracing the internet more, Microsoft will really try to put Skype in all Windows powered devices and perhaps will strike deals to incorporate Skype in innovative products like Smart TVs and more.

Whether Microsoft's biggest ever acquisition proves a success and many benefits or not. Either way, it will make the next chapter in the battle royal between the software maker and its rivals that much more compelling.