Microsoft set to buy Skype for $8.5bn

Analysts surprised by the sum, considering Skype's losses.

Skype is to be bought by Microsoft for $8.5bn (£5bn), according to reports today. This follows rumours last week of interest by Google, Facebook or Cisco Systems.

The deal, expected to be announced later today, would be Microsoft's biggest ever purchase.

The online phone service was bought by eBay in 2005 for $2.6bn and was expected to be incorporated into the auction service to provide greater communication between bidders and sellers. The failure of this idea saw eBay revalue Skype at $1.4bn and sell off 70 per cent of the company in 2007.

Last year Skype made a loss of $7m on revenues of $859.8m. It has debts of $686m.

The size of Microsoft's deal has shocked analysts, many of whom see $8.5bn as a vast overpayment for the company. Skype has 663 million registered users, though most only utilise its free service of internet calls made between computers. Analysts now expect Skype's voice and video communications service, and its customers along with it, to be integrated into Microsoft's own products.