REDMOND, Wash. — Microsoft agreed Tuesday to buy internet phone company Skype Technologies for $8.5 billion in cash, the most aggressive move yet by Microsoft to play in the increasingly-converged worlds of communication, information and entertainment.
“Skype is a phenomenal service that is loved by millions of people around the world,” Microsoft chief executive Steve Ballmer said in a statement announcing the deal. “Together we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world.”
Skype will become a new business division within Microsoft, and Skype chief executive Tony Bates will assume the title of president of the Microsoft Skype Division, reporting directly to Ballmer.
Investors were lukewarm on the move, sending Microsoft shares down $0.41, or 1.5 percent, to $25.44 in New York trading after the deal was announced. Virtually every other major technology stock was on the rise.
Buying Skype gives Microsoft a recognized brand name on the internet at a time when it is struggling to get more traction in the consumer market.
Microsoft invested heavily in marketing and improving the technology of its Bing search engine. While it made some market share gains over the past year, Google still dominates the search market, with more than 65 percent of US searches going through its site.
The companies said Skype would support Microsoft devices like Xbox, Kinect, Windows Phone and Windows devices and that Microsoft would connect Skype users with Lync, Outlook, Xbox Live and other communities. Microsoft was planning to continue to invest in and support Skype clients on non-Microsoft platforms.
The Skype deal was the biggest acquisition in the 36-year history of Microsoft, a company that traditionally shied away from large deals.
It also showed how far Skype has come since it was launched in 2003 by Niklas Zennstrom and Janus Friis, two men who had created a file-sharing technology called Kazaa that became widely associated with music piracy. While Skype was initially popular with techies, it increasingly worked its way into the mainstream by offering free or cheap phone calls, which were especially appealing to international callers.
EBay purchased the company in 2005 for $2.6 billion in cash and stock, to allow eBay’s buyers and sellers to use the service to communicate about potential transactions — but that experiment faltered, and eBay gave up on Skype in 2009, selling a 70 percent stake to a group of technology investors including venture capital firms Index Ventures and Andreessen Horowitz, Silver Lake Partners and the Canada Pension Plan Investment Board, who will make a handsome return on the Microsoft transaction.
The agreement was approved by the boards of Microsoft and Skype and is subject to regulatory approvals.
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