Microsoft to acquire Skype for $8.5 billion

Microsoft (Nasdaq: MSFT) confirmed that it is going to buy VoIP provider Skype for about $8.5 billion.

By acquiring Skype, Microsoft will gain a new weapon to challenge the likes of Apple to get a strong foothold in the consumer market that's been eluding them for a number of years.

Rumors of Skype heading auction block emerged last week when a report surfaced that both social networking site Facebook and search engine giant Google (Nasdaq: GOOG) were developing deals for Skype. The report added that Microsoft was also a potential bidder.

Of course, the question is, will Microsoft be able to be more successful with Skype than its former owner eBay was?

After purchasing Skype in 2005 for $2.6 billion in cash and stock, eBay decided the VoIP business was not for them and sold a 70 percent stake to a group of private investors including Silver Lake Partners, venture capital firms Index Ventures and Andreessen Horowitz, and the Canada Pension Plan Investment Board.

Microsoft's purchase of Skype could also have repercussions for the enterprise and business market to which it provides software.

Steve Hilton, Head of Enterprise Research, is quick to point out that while Microsoft could enhance its consumer position, convincing enterprise customers that it could have utility in their organizations will be an uphill battle.

"Skype, while having some nice communications features, is still a consumer-grade solution," he said. "Enterprises don't want low quality communications services when dealing with customers. While enterprises will trade-off lower prices for lower quality, they could have purchased Skype solutions long ago had they wanted to save a few dollars (or pounds or Euros)."

Hilton added that Microsoft would also have to overcome the missteps it has taken in trying to establish its own voice offering.  

"Microsoft has had plenty of voice-centric train wrecks over the years," he said. "One of the most recent was their dabble into the IP PBX market with Response Point."

For more:
- Wall Street Journal has this article
- Here's FierceVoIP's take

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