Microsoft Corp to acquire Skype for 8.5 billion

In Skype,Microsoft is buying the leader in Internet voice and video communications,with 107 million users per month connected for more than 100 minutes a month on average. That large and active user base represents a major asset,Steven A Ballmer,Microsofts chief executive,said in an interview. Its an amazing customer imprint, Ballmer said. And Skype is a verb,as they say.

In an interview Ballmer never mentioned Google,Microsofts archrival whose name is used as a verb in Internet search a market where Microsoft is spending heavily to try to catch Google,making some recent progress,but at great financial cost. Buying Skype,analysts say,gives Microsoft the upper hand in the market for Internet communications,both for consumers and businesses.

Google is way behind Skype,and getting ahead of Google in this market was certainly an incentive for Microsoft, said Leif-Olf Wallin,an analyst for Gartner in Sweden. Ballmer emphasised that Microsoft plans to expand Skypes business and inject its voice-and-video technology across the spectrum of Microsoft products,from consumer offerings like Xbox to its Office productivity software. There are a lot of great opportunities to optimise Skype services in Microsoft products, Ballmer said.

Despite its popularity,the service has struggled to maintain profitability. Since most of its services are free,Skype makes much of its income from a small group of users who pay for long distance calls to telephone numbers.

In 2010,Skype recorded 859.8 million in revenue but reported a net loss of 7 million. Marc Andreessen the co-founder of venture capital firm Andreessen Horowitz,an investor in Skype is optimistic about the companys prospects,given Microsofts extensive lineup of products and various market opportunities.