Microsoft Finalizes Skype Buy: Ready to Battle Google?

Five months after Microsoft said it would acquire Skype for $8.5 billion, the deal was approved and the transaction closed. Is Microsoft now ready to battle Google, whose proposed $12.5 billion takeover of Motorola Mobility is expected to close next quarter?

Microsoft is aggressive. Skype CEO Tony Bates, who's staying under Microsoft, said he hopes to reach one billion users daily integrating voice conferencing into all Microsoft platforms.

The deal was heavily scrutinized by the European Commission and still has not been approved by authorities in several countries (Russia, Serbia, Taiwan and the Ukraine), Microsoft said.

But adding Skype to the portfolio of the Redmond, Wash.-based software giant brings about 30 million online users and as many as 145 million active monthly users into the Microsoft umbrella.

Clearly, both Microsoft and Google are targeting a sort of holy grail of mobile platforms that seamlessly communicate all matters of voice, data, video, social media and entertainment --- not to mention advertising --- because it's where they see growth.

Buying Skype, though, would put Microsoft squarely into the telephone business. Last year, Skype handled 190 billion minutes of traffic, up 68 percent from 2009, estimates TeleGeography. That was a giant chunk of an $83 billion international voice market that handled about 413 billion minutes and one of the few sectors that grew year-over-year as traffic growth for the AT&Ts and Verizon Communications eased.

Skype already works with Facebook's 750 million users, so Microsoft's overall positioning ought to be strengthened. In search, Microsoft is wielding its Bing offering with support for Yahoo, but is still nowhere near Google in views and advertising.

Google, though, may be way ahead. The company claimed it has already activated 190 million Android devices during the third quarter and its annual mobile business is running at $2.5 billion, more than double the rate of a year ago. Once it takes over Motorola Mobility, it will clearly push more into the sector.

The mobile phones are just getting amazing, said Google CEO Larry Page Thursday after results were announced. We definitely see that the experience on mobile improving greatly, especially with Android.

Microsoft's purchase ends a long saga for the Luxembourg-based Skype, which had been acquired by eBay.

In 2009, eBay sold a 65 percent stake for $1.9 billion to private equity groups including Silver Lake, Index Partners, Andreesen Horowitz and the Canada Pension Plan. Now all parties, including eBay and Skype co-founders Niklas Zennstrom and Janus Friis, sold the entire company to Microsoft for $8.5 billion, its biggest-ever acquisition.

Microsoft, which has had slow adoption of its Windows Phone 7 OS, previously licensed it to Finnish giant Nokia, the one-time mobile phone leader now ranked third in second-quarter market share behind the Apple iPhone and Samsung Electronics' Google Android phones, IHS estimates.

GoogleVoice, an offshoot of Grand Central, acquired in 2007, had previously been added to Gmail, as a free service, so the Mountain View, Calif.-based search leader is no stranger to telecommunications. More recently, it launched Google+ as a rival to Facebook and claimed 500,000 users in two weeks. Participants in GoogleCircles are able to communicate by voice as well as online.

Much of the focus on the Motorola Mobility takeover was on Google's appetite for Motorola's 17,000 patents for wireless spectrum and telephony. But given the prowess of Motorola Mobility CEO Sanjay Jha, the real bet could well be on scoring yet another turnaround, making Google's Motorola phones No. 1 in the market vs. Apple's iPhone 4S.

Microsoft shares are trading around $27.18, close to Thursday levels, while Google shares are up nearly 8 percent, to $559.99, after beating earnings expectations.