Microsoft buys Skype for $8.5 billion; creates new business division

The rumors were right. Microsoft announced on May 10 that it bought Skype, an Internet communications vendor, for $8.5 billion.

Instead of trying to mash Skype into an existing Microsoft business division, the company has decided to create a new, separate Skype business division, with Skype CEO Tony Bates as the newly minted President. Bates will report directly to Microsoft CEO Steve Ballmer.

In its press release announcing the deal, Microsoft played up the potential synergies between Skype and its own communications offerings, including its Lync VOIP platform, Outlook mail, Messenger instant-messaging, Hotmail Web mail and Xbox Live gaming service.

"Skype will support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices, and Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities. Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms," said the release.

Microsoft offered no timetable or further details as to when and how it will make Skype available as part of any of its existing product offerings.

According to earlier reports, Microsoft was bidding against Google and Facebook for Skype. As my colleague Larry Dignan noted, the $8.5 billion Skype purchase price made for one expensive game of keepaway.

Microsoft and Skype are holding a press conference (hopefully) outlining more particulars of the deal at 11 a.m. ET. There will be a live Webcast (with no follow-up interviews permitted).

Today's deal with Skype marks Microsoft's largest acquisition (dollar-wise) in the history of the company.  For the past couple of years, Microsoft execs seemingly had decided that Microsoft’s history of assimilating successfully its big acquisitions (aQuantive, Danger, AdECN, Bungie, etc.) was not so great, resulting in the company shying away from anything but relatively minor, targeted acquisitions.

Last night, AllThingsD reported that Microsoft dealmaker Charles Songhurst was key in helping Microsoft CEO Steve Ballmer broker the Skype deal. Interestingly, Songhurst also was credited with helping convince the Microsoft brass to call off the Yahoo acquisition.