MSFT buys Skype for $8.5B; good-bye Skype IPO

Microsoft pays cash for Skype after Skype just updated its S-1 form

Skype has a new home. As of Tuesday morning, the globally renowned VolP service has nestled safely in the warm, protective bosom of Microsoft. For $8.5 billion in cash.

IN CASH.

Recall that eBay dropped Skype in 2009 for $2.75 billion, after buying it for $2.6 billion in 2005. A quick glance at its finances for the four years it was with eBay paints a gruesome picture. While Skype has had no problem attracting customers, most of its users are unpaid subscribers. While its revenue steadily climbed from 2005 to 2009, its income loss has steadily risen as well. In 2005 the company reported a loss of $29.2 million. In 2009, it reported a loss of $269 million. Youch.

So what’s Microsoft’s angle here? 

Last week it was rumored that Facebook and Google were both eyeing Skype and were in early talks to acquire the service for a deal that would’ve valued Skype between $3 and $4 billion. A Google-Skype or Facebook-Skype deal would’ve made sense. Google could have integrated Skype with Google Voice, and Facebook-Skype rumors were swirling as far back as September 2010, when many expected the two to announce a partnership that would’ve involved SMS, voice calls, and Facebook Connect. Skype has already integrated Facebook into its latest software release, Skype 5, which allows users to call and text their Facebook friends.

Skype will support Microsoft devices like Xbox and Kinect, as well as Windows Phones, according to the announcement. Skype will become a new business division within Microsoft, and Skype CEO Tony Bates, who just joined the company in October, will assume the title of President of the Microsoft Skype Division.

So what’s the deal with the ever-elusive Skype IPO? Why you leave me hangin’, Skype? Skype filed an S-1 in August 2010, and in January the company was said to be delaying its IPO until the second half of 2011. But then in March it posted an updated S-1, which seemed to suggest the IPO plans were still on track. The update showed that Skype’s financial health appears to be on the mend: in 2010, the company posted revenues of $859 million, compared to $624 million in the first 11 months of 2009. Furthermore, the company reported a net income loss of only $7 million, compared to $269 million in the first 11 months of 2009. Of course, this falls in line with Skype’s erratic earnings, so who knows what next year will look like.

So…it’s the IPO that never was, apparently. Skype CEO Tony Bates and Microsoft CEO Steve Ballmer will discuss the deal in more detail in a live webcast at 8 am PST, so maybe we’ll get some more clarification on the Skype IPO ghost then. We’ll keep you posted.

(Image source: Webpronews)