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Update: Microsoft makes $8.5 billion Skype offer official

The Skype Internet phone program is seen on a computer in New York City.

UPDATED REPORT

STEVE CHIOTAKIS: A big buyout's been announced this morning that's making a whole lot of waves in the tech world. Software giant Microsoft is buying internet phone network Skype for $8.5 billion. It's the biggest pickup for Microsoft in the company's 36-year history.

Marketplace's David Gura is with us live and has more on what Microsoft will get in the deal. Good morning David.

DAVID GURA: Hey Steve.

CHIOTAKIS: So all right, what's Microsoft get in this deal?

GURA: The company has been trying to get back on its feet. Over the past few years, it's ceded some ground to competitors, including Google and Apple. With Skype, you can chat and make phone calls over the Internet. Google has Google Voice. Apple has FaceTime. And until today, Microsoft wasn't in the game. The company's CEO Steve Ballmer just said that people will quote "we'll move beyond email and text to richer experiences" in the future.

I asked technology analyst Chris Brauer to explain that.

CHRIS BRAUER: It's not so much about what Skype used to be, as what Skype is going to be in a few years' time, and that's really down to how well Microsoft manages this acquisition.

Brauer told me he thinks Microsoft will integrate Skype technology into its software and search engine, Steve, and into its video game console and mobile phones, too.

CHIOTAKIS: All right, so hasn't, David, Skype been down this road before?

GURA: That's right -- eBay bought the company in 2005, but that deal didn't turn out the way the online auction site wanted. For the last year or so, there have been lots of rumors about Skype's future. A list of potential suitors included Cisco and Facebook. Now, I should stress, Skype is not profitable. Last year it lost about $7 million. But it's been around for a while now -- since 2003, and today it has more than 650 million users around the world.

CHIOTAKIS: Marketplace's David Gura in Washington. David, thank you for the update.

GURA: Thanks Steve.


ORIGINAL REPORT

Steve Chiotakis: The tech world is keeping an eye on a big buyout that could be announced in a matter of hours. Software behemoth Microsoft is reportedly close to buying the Internet phone network Skype. It's a deal that's likely to be worth more than $8 billion.

Marketplace's David Gura reports.


David Gura: With Skype, you can video chat and make phone calls over the Internet.

Kara Swisher: They were the brand that pioneered this.

That's Kara Swisher, executive editor of All Things Digital. She says Microsoft probably wants to integrate Skype into its software and search engine, into its video game console and its mobile phones.

But Rupert Goodwins, the editor of the tech website ZDNet UK, suspects there's something else at play.

Rupert Goodwins: It could also be a desperate move by Steve Ballmer, the CEO of Microsoft, to pull together one big deal that actually makes sense. He's come under a lot of criticism recently --

-- For ceding a lot of ground to competitors, including Google and Apple. Goodwins says Microsoft may just want to bring Skype's users on board, but he wonders how much they're really worth.

Goodwins: There are 660 million people who use Skype, but most of them will already be Microsoft users, so they won't be new to Microsoft.

But the company's been trying to focus more on big business, and some analysts say the Skype deal could open the door to the corporate videoconferencing market.

In Washington, I'm David Gura for Marketplace.

About the author

David Gura is a reporter for Marketplace, based in the Washington, D.C. bureau.

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