New York, May 10
In one of its biggest buyouts in over three decades, Microsoft will buy Skype for $8.5 billion in cash, a move that would bolster the software major’s presence in the highly competitive Internet market.

The deal, announced today, would be a huge help for cash-rich Microsoft in competing with strong rivals such as Google and Apple apart from strengthening its footprint in the consumer markets.

“The companies have entered into a definitive agreement under which Microsoft will acquire Skype, the leading Internet communications company, for $8.5 billion in cash from the investor group led by Silver Lake,” the two firms said in a joint statement.

The transaction has been approved by the boards of directors of the two companies.

Skype, a popular communications software, uses of voice over Internet protocol technology that makes international voice and video calls cheaper. Microsoft is estimated to have cash worth $48 billion and the Skype deal would become its largest acquisition in around 36 years. The software major's last big-ticket deal was the $6 billion purchase of advertising firm aQuantive in 2007.

“Skype is a phenomenal service that is loved by millions of people around the world. Together we 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 CEO Steve Ballmer said.

Post acquisition, Skype would become a new business division within Microsoft, and Skype CEO Tony Bates would become President of Microsoft Skype Division, reporting directly to Ballmer.

Skype would support Microsoft devices such as gaming console Xbox, Kinect as well as a wide array of Windows applications. Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities. Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms, the release added.

“Together, we will be able to accelerate Skype’s plans to extend our global community and introduce new ways for everyone to communicate and collaborate,” Skype CEO Tony Bates said.

Founded in 2003, Skype was acquired by eBay in September 2005, and then acquired by an investment group led by Silver Lake in November 2009. — Agencies