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Microsoft Buys Skype for $8.5 Billion

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May 10, 2011
The voice-over-Internet software program Skype is once again earning lots of money but not from users. This time, Microsoft is buying the Scandinavian company, for $8.5 billion.

Microsoft said that it would include Skype in its Windows smartphones, Outlook email, and Xbox machines. Seeking to ease fears from elsewhere in the software industry, the Redmond, Wash.-based software developer said that it would continue to support Skype functionality that was used on other (non-Windows) software systems.

Skype CEO Tony Bates will continue to head the operations, which will become a division within Microsoft.

The previous owners of Skype were eBay and a group of private investment firms. EBay bought Skype in 2005, for $2.6 billion, but never managed to find a way to connect the functionality of eBay's core business, online auctions, and Skype's core business, voice-over-Internet calling and file-sharing.

Skype estimates that its monthly users exceed 170 million people. The service is especially popular in Europe, where country-to-country rates can be quite high, and with Americans who call overseas.

Despite its relative ubiquity, Skype is not even 10 years old. The company, originally called Skyper, was formed in 2003, by Niklas Zennstrom and Janus Friis.

The acquisition is Microsoft's largest ever, topping its 2007 purchase of aQuantive, an online advertising service, for $6 billion.

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