Just days after reports that Google and Facebook were interested in partnering with, and possibly buying VoIP company Skype, Microsoft announced that it was buying the company for $8.56 billion in cash.
Last year, Skype had a profit of $860 million on which it posted 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. That alone makes it surprising; the company’s track record with large purchases is decidedly mixed. Danger, the exciting mobile technology company that produced the Hiptop, better known as the T-Mobile Sidekick line, was purchased for an estimated $500 million in 2008. The aQuantive purchase too had mixed outcomes, with Redmond unable to find a role for the Razorfish division before eventually selling it off in 2009; Microsoft continues to be unable to make a profit from online
Microsoft has in the last couple of years has been sticking to buying smaller, easier-to-manage organizations, leading some to argue that this was a direct result of the digestive difficulties faced with the large purchases. A $7 billion Skype offering would show that perhaps Redmond believes it has resolved such problems.
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