Microsoft buys Skype for $8.5 billion

The shy and retiring Steve “There’s A Kind Of Hush” Ballmer has shocked Wall Street by writing an $8.5 billion cheque to buy Skype.

Wall Street thinks he probably paid a bit too much for the outfit which lost $7 million last year and has a debt of $686 million.

It is the largest acquisition since Redmond paid $6 billion for the online advertising company aQuantive in 2007. The move would bring it 660 million users worldwide while giving it a foothold in voice and video communications.

Analysts think that it could be integrated into existing Microsoft products such as its Xbox 360 games console and Kinect gaming systems, or even into its flagship Office product to let users collaborate more effectively.

Facebook, Google and Cisco Systems were interested in acquiring it to fold into their own services and while analysts think the sale is a good idea, the price tag has left them a bit upset.

Skype was bought by eBay for $2.6 billion in 2005 . It later wrote down Skype’s value by $1.4bn and flogged off a 70 percent stake at the end of 2007. It still has 30 percent and with the Volish cash it is now worth $2.4 billion, which means that it is quids in on its Skype moves.

Google previously looked at purchasing Skype in 2005 but was worried about patent problems with the technology. Essential patents for the service are owned by a company linked to Skype’s founders.

Vole already has a voice-over-internet offering, called Lync, which combines email, instant messaging and voice communications into a single program. It is part of its Office division, but has failed to attract much attention.

Details on the deal will be announced later today the Guardian claims.