warning Hi, we've moved to USCANNENBERGMEDIA.COM. Visit us there!

Neon Tommy - Annenberg digital news

Microsoft, Skype Close To Reaching A Deal

David McAlpine |
May 9, 2011 | 10:44 p.m. PDT

Executive Producer

Microsoft Corporation, the world's largest maker of computer software, is said to be very close to a deal to buy Internet phone and chat company Skype Technologies for more than $7 billion.

The deal is expected to be announced Tuesday morning, according to a source, but both Microsoft and Skype are declining to comment.

The Telegraph reported:

Skype, which had delayed plans for an initial public offering, had recently been looking at other options.

Facebook and Google were separately considering a tie-up with Skype, two sources with direct knowledge of the discussions previously told Reuters. Google had held early talks for a joint venture with Skype, the second source said.

A source said at the time such a deal could value Skype at $3bn to $4bn - less than the value put on it by Microsoft's interest.

Details of the deal are sparse, but some value the purchase at as much as $8.5 billion.

From The Washington Post:

Chief Executive Officer Steve Ballmer would use Skype’s services in a bid to lure Web users and narrow Google Inc.’s lead in Internet advertising. The acquisition would be Microsoft’s largest, dwarfing the purchase of AQuantive for about $6 billion in 2007.

A purchase by Redmond, Washington-based Microsoft would divert Skype from a plan, announced in August, to sell $100 million of shares in an initial public offering. With 663 million global users, Luxembourg-based Skype is the world’s largest provider of international calling. The company has also struggled to convert users of its free PC-to-PC phone services into paying customers, according to a March regulatory filing.

The price discussed includes net debt, one of the people said. Skype reported about $775 million in debt, along with a revolving credit line of $30 million, in a filing in April.

Ballmer is aiming to revive Microsoft’s online services division, which had an operating loss of $726 million in the three months that ended in March. The company lags behind Google in Web search and related advertising.

Skype was first formed in 2003 and later bought by eBay in 2005 for more than $2 billion. If the deal becomes official, it could be the biggest acquisition in Microsoft's history.



Craig Gillespie directed this true story about "the most daring rescue mission in the history of the U.S. Coast Guard.”

Watch USC Annenberg Media's live State of the Union recap and analysis here.