Why Microsoft is buying Skype

Highlights of Deal
Valuation of Skype before the deal-$4.3 billion Acquisition at $8.5Billion by Microsoft almost double from real value. Microsoft biggest acquisition till date. Microsoft gets benefits for its new product development.

Reasons for acquisition by Microsoft

Pressure by the investors in Skype because of delay in IPO launch Losses $7 million last year which was a panic point for Skype. Need for new partner to continue the growth of the company . To fight competition of Apple and Google.

Money paid to investors of Skype

eBay gets $2.55 billion for its 30-percent Niklas Zennstrm and Janus Friis gets $1.19 billion for its 14 percent stake Silver Lake, Andreessen Horowitz and the Canada Pension Plan Investment Board (CPPIB) own 56 percent of the company , and that stake is worth $4.76 billion. Andreessen Horowitz had three percent of the deal and made $205 million profit on their $50 million initial investment.

Benefits to Microsoft in long term

Skype gives Microsoft a boost in the enterprise collaboration market, thanks to Skypes voice, video and sharing capabilities, especially when competing with Cisco and Google. It gives Microsoft a working relationship with carriers, many of them looking to partner with Skype as they start to transition to LTE-based networks. It would give them a must-have application/service that can help with the adoption of the future versions of Windows Mobile operating system.

Is deal profitable to Microsoft

The biggest reason for Microsoft to buy Skypeis Windows Phone 7 (Mobile OS) and Nokia. The software giant needs a competitive offering to Google Voice and Apples emerging communication platform, Facetime. It gets access to Skype assets (Microsoft is an investor in Facebook) and it gets to keep Skype away from Google. Microsoft have failed in tablet PC software and mobile OS race to apple and Google and this will help to develop new product to attain its market share back. Microsoft name will help to get good IPO subscription for Skype to offload the high price of deal.