Microsoft Corp. agreed Tuesday to buy Internet phone company Skype Technologies SA 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 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 Microsoft Chief Executive Steve Ballmer.
The deal allows Microsoft to integrate Skype's free and low-cost Internet-based video and telephony services into everything from its Bing search engine to Windows smartphones and its Xbox videogame system. The need to add a communications component is seen as crucial with the growing popularity of Apple Inc.'s Facetime video-chat service and Google Inc.'s Voice.
Microsoft has invested heavily in marketing and improving the technology of its Bing search engine. While it has made some market share gains over the past year, Google still dominates the search market with more than 65% of U.S. searches going through its site.
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