Microsoft Buys Skype for $8.5 Billion Why?

Microsoft Buys Skype for $8.5 Billion. Why, Exactly?

Quick Summary:

As Google and Facebook were interested in partnering a joint venture with each other for buying a VoIP Company Skype, Microsoft announced that it was buying the company for $8.56 billion US Dollars in cash.

What Is Skype?

Skype is a text, voice and video conference call online based company for every user on internet.

Skype Background:

Last year, Skype had revenue of $860 million and revealed an operating profit of $264 million. However, overall it made a small loss of $7 million, and had long-term debt of $686 million. This is the second time Skype has been bought out; after being started in 2003, it was purchased by eBay in 2005 for $3.1 billion. EBay then sold the majority of its stake in 2009 to a private investment group for $1.2 billion less than it paid.

The purchase was Microsoft’s biggest ever, surpassing even the $6 billion acquisition of advertising firm Quantive in 2007. That alone makes it surprising; the company’s track record with large purchases is decidedly mixed, but still Microsoft continues to be unable to make a profit from online advertising.

Impact/Results of Buying Skype:

        i.            Microsoft first step towards the death.

      ii.            Loss of free voice and video calls for internet users.

    iii.            Still big completion for Facebook video chat and Google voice.

    iv.            Attempting to not make rivals like facebook and google come closer.