Microsoft agrees to buy Skype for $8.5 billion

Microsoft says it has agreed to buy the popular Internet telephone service Skype for $8.5 billion in the biggest deal in the software maker’s 36-year history. Buying Skype gives Microsoft access to a user base of about 170 million people who log in to Skype every month, using the Internet and Skype usernames, as a complement to the traditional phone network and its phone numbers. Microsoft says it will merge Skype’s functions to its Xbox game console, Outlook e-mail program and Windows smartphones. All of these platforms already have other options for Internet calling, but the addition of Skype users would expand their reach, making them more useful. Microsoft says it will continue to support Skype on other software platforms. Skype users made 207 billion minutes of voice and video calls last year. Most of that usage is free computer-to-computer calls, which has made it difficult for the service to make money since entrepreneurs Niklas Zennstrom and Janus Friis started the company in 2003. An average of about 8.8 million customers per month, or just over 5% of the user base, pay to use Skype to call out to the regular phone network. The vast majority of paying Skype users are in Europe, where high country-to-country rates for traditional phone calls make Skype more popular than in the U.S., where state-to-state calling is cheap.