Skype Microsoft

SEATTLE — Microsoft Corp. is buying Internet phone company Skype Technologies for $8.5 billion.

Microsoft said the acquisition will expand its product offerings, including unified communication software Lync, email software Outlook, instant messaging software Messenger, free Web email Hotmail and online video game network Xbox Live.

Microsoft said Skype will run on its fledgling mobile operating system Windows Phone, Xbox, Kinect and other Windows devices, without being more specific.  Skype will become a new division in Microsoft. 

Was software giant Microsoft’s biggest ever aquisition a costly case of verb envy or a shrewd move in the battle to secure the digital future from its rivals Google?

Last week, Skype also became the world's most expensive verb when Microsoft paid $8.5bn (£5.2bn) in cash for a company best known for linking families and friends in online video conversations across the world. Steven Ballmer, Microsoft's ebullient chief executive, could barely contain his excitement at a press conference in San Francisco last week to announce the deal.

Skype's services also span hot markets — online socializing, mobile phones and digital video - where Microsoft has been struggling to catch up with Facebook, Apple and Google.

About 170 million people worldwide who use Skype regularly for calls and chats. Microsoft already has a Skype-like service called Windows Live. But the real Skype is far more popular and bridges different computers and phones. For businesses, Microsoft has separate communications software.

Avoiding big bills

Skype allows users to make voice and video calls for free or pennies. Calls from one Skype account to another are free. Skype users made 207 billion minutes of voice and video calls last year - almost 400,000 years' worth. Only about 5 percent of Skype users pay for it.

Skype users don't have to pay to install the software on Apple's iPhone, iPad computer tablet or devices running on Google's Android system.

The partnership would bring Skype to the Xbox video game console and has sold 50 million copies, making it No. 2 video game system behind the Nintendo Wii.