Software giant Microsoft today announced a deal to buy internet telephone network Skype in a €5.9bn ($8.5bn) deal.
The move to purchase the loss-making but popular Skype underlines Microsoft's bid to gain ground on rivals like Google, as well as the need to gain new customers and platforms for its software as smartphones and tablets grow at explosive levels.
Skype, which lost $7m last year, allows people to make calls at no charge and gives Microsoft a foothold in the potentially lucrative video-conferencing market.
Microsoft has invested heavily in mobile and internet technologies as the use of PCs, which underpin its Windows and Office franchise, is under threat.
Apple last year overtook Microsoft to become the world's most valuable technology company and just this week overtook Google. The Skype deal is the largest in Microsoft’s 36 year history.
The reported value would see the deal overtake Microsoft's successful bid for online advertising agency aQuantive in 2007 for $6bn (€4.18bn).
Although Skype is popular for its free calling services, which can be made to other Skype users, it also has around 8.8 million paying customers per month.
The amount of call time on Skype's network totalled 207 billion minutes last year, according to regulatory documents.
The popularity of the free calls has made it difficult for the company to make money since it was founded by entrepreneurs Niklas Sennstrom and Janus Friis.
A Skype sale has been speculated upon for weeks, with Google and Facebook also rumoured to be interested.
Skype was bought by eBay for $2.6bn in 2005 but it sold a 70pc stake to private equity firms Silver Lake and Andreessen Horowitz for $2bn.
Other major shareholders include tech-firm Joltid and the Canada Pension Plan Investment Board.
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