According to Fortune, Microsoft has agreed to buy the
voice-over-Internet company for $8.5 billion, including the assumption
Great move and a big win for Microsoft. I can not think of a better
way for MS to put all of that cash to work. This also takes that Skype
IPO off the table - at least for the short term. In terms of reaching
customers this is a great B-C and B-B play for Microsoft. The Skype
applications bundle works well on the Windows platform. This will ensure
the product will only get better over time with more features.
There had been reports and much speculation last week that Skype was
in acquisition or partnership talks with both Microsoft and Facebook.
Skype will become a new business unit within Microsoft, to be run by
current Skype CEO Tony Bates. He will report directly to Microsoft boss
Luxembourg-based Skype began as a VC-backed company, before being
acquired by eBay for $2.6 billion in 2005. The combination didn't quite
work out, and eBay gave public thought to either selling the unit
outright or spinning it off into an independent public company. In
November 2009, it agreed to sell a 65% stake in Skype for $1.9 billion
to an investor group that included Silver Lake Partners, Andreessen
Horowitz, Canada Pension Plan Investment Board and Index Ventures (the
7th-largest leveraged buyout of 2009).
Skype then filed for a $100 million IPO last August. The company
reported a $6.9 million net loss in 2010, on nearly $860 million in
revenue. It reported just $686 million in long-term debt, and just over
$1 billion in liabilities. With all of the MS infrastructure
capabilities, the synergies will make for a wonderful union.
This is, obviously, a remarkable return for the VC firms that
invested in Skype in November 2009. Recall, this was a very
controversial deal at the time. This was the single-largest check ever
written by Silver Lake, and the first time that Andreessen Horowitz had
done something that didn't look at all like traditional venture
Remember all that talk that Microsoft was on the M&A sidelines?
Not any more. Particularly if Facebook also made a bid. And this clearly
will improve the value proposition of Microsoft devices like XBox and
The price-tag suggests that eBay made a shrewd move in holding onto a
large Skype stake, rather than selling the entire thing in 2009.