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"So much for that Skype IPO.\nFortune has confirmed that Microsoft \n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\tMSFT\n\t\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\n\t\t\t has agreed to buy the voice-over-Internet company for $8.5 billion, including the assumption of debt. Expect a formal announcement within the next hour.\nThere had been reports last week that Skype was in acquisition or partnership talks with both Microsoft and Facebook.\nSkype will become a new business unit within Microsoft, to be run by current Skype CEO Tony Bates. He will report directly to Microsoft boss Steve Ballmer.\nLuxembourg-based Skype began life as a VC-backed company, before being acquired by eBay \n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\tEBAY\n\t\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\n\t\t\t for $2.6 billion in 2005. The combination didn&amp;#8217;t quite work out, and eBay gave public thought to either selling the unit outright or spinning it off into an independent public company. In November 2009, it agreed to sell a 65% stake in Skype for $1.9 billion to an investor group\u00A0that included Silver Lake Partners, Andreessen Horowitz, and Canada Pension Plan Investment Board (the 7th-largest leveraged buyout of 2009).\nSkype then filed for a $100 million IPO last August. \u00A0The company reported a $6.9 million net loss in 2010, on nearly $860 million in revenue. It reported just $686 million in long-term debt, and just over $1 billion in liabilities.\nA couple quick thoughts, as details continue to come in:\n1. This is, obviously, a remarkable return for the PE/VC firms that carved out Skype in November 2009. Not just cash-on-cash, but also IRR (which takes length of investment into account). Remember, this was a very controversial deal at the time. Pretty sure the term &amp;#8220;hairy&amp;#8221; was used more than once. There were questions as to whether Skype&amp;#8217;s problems should be pinned on eBay or were inherent, and there were subsequent lawsuits from the company&amp;#8217;s founders (who ultimately received a small ownership stake). Moreover, this was the single-largest check ever written by Silver Lake, and the first time that Andreessen Horowitz &amp;#8212; a very new firm at the time &amp;#8212; had done something that didn&amp;#8217;t look at all like traditional venture capital. OH, and the buying group guaranteed the leveraged loans (which is very unusual)\n2. Remember all that talk that Microsoft was on the M&amp;amp;A sidelines? Pretty sure that will be tamped down for a bit. After all, this is the largest acquisition in company history. d this clearly will improve the value proposition of Microsoft devices like XBox and Kinect.\n3. The price-tag suggests that eBay made a shrewd move in holding onto a large Skype stake, rather than selling the entire thing in 2009.\nUPDATE:\u00A0The deal is now official. Here is\u00A0the press release."^^<http://www.w3.org/2001/XMLSchema#string>
<http://fortune.com/2011/05/10/yes-microsoft-is-buying-skype/?section=magazines_fortune>