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NEW YORK (Reuters) – Microsoft is near to buying internet telephony network Skype in an $8.5 1000000000 deal, a source old with the situation said, as it seeks to acquire ground on growing rivals much as Google.

Buying the loss-making but favourite Skype would emphasise Microsoft's need to acquire newborn customers and platforms for its code as smartphones and tablets explode in popularity.

Skype, which allows people to attain calls at no charge, would also provide Microsoft a foothold in potentially the profitable video-conferencing mart as global businesses seeking to turn disbursal agitate to lower-cost structure of communicating.

Microsoft has already place more energy and resources into ambulatory and internet technologies as the ingest of PCs, which match its Windows and Office franchise, is baritone threat.

This modify was starkly illustrated terminal assemblage when Apple's portfolio of desirable consumer artefact propelled it time Microsoft to embellish the world's most priceless profession company. The concern of iPhones and iPads has since been named as the most priceless brand too, reordering Google.

The Skype care -- which would be the large in the 36-year story of the world's maximal code consort -- is due to be declared as early as Tuesday morning, the source told Reuters. Microsoft and Luxembourg-based Skype declined comment.

The $8.5 1000000000 mooted toll tag, including debt, was a surprise. Although the assets would not stretch cash-rich Microsoft, some said it was broad for a consort whose control has changed individual nowadays during its relatively short life.

"In this region of Internet Bubble 2.0, picking up an idle online consort for roughly 10 nowadays sales probably seems complete cheap," Shanghai-based Michael Clendenin, managing administrator of consulting concern RedTech Advisors, said.

"But if you consider (it) was meet valued at most $2.5 1000000000 18 months past when a chunk was oversubscribed off, then $8.5 1000000000 seems generous and means Microsoft has a broad surround to climb to establish to investors that Skype is a needed linchpin for the company's online and ambulatory strategy," he added.

This was echoed by Ben Wood, nous of investigate concern CCS Insight: "The bounteous unanswered question is how do Skype assets impact for Microsoft, they already impact fast messaging, IP telephony...how do you justify the price?"

"That existence said, Skype is a vibrant community, a diverse global accord with a young population and Skype is making inroads into senior parts of the population too," Wood added.

Skype, which suspended plans for an initial open substance due to improve $1 billion, has been hunting at another options, including tie-ups with Facebook and Google. Such a care was seen as valuing Skype at $3 1000000000 to $4 billion.

STOCK LANQUISHING

Despite raise sales and profit in the terminal eight years, Microsoft's hit has mostly languished, as investors worry most its knowledge to furniture newborn rivals or alter to newborn structure of computing, especially the danger posed by newborn ambulatory devices.

Microsoft has countered with a newborn edition of its ambulatory code -- which will noesis the incoming generation of Nokia smartphones -- and is nonindustrial a newborn operative system that will impact on low-power tablet PCs.

But online recording chitchat relic a weakness. Although the consort already has recording in its Windows Live Messenger service, it is not acquirable on its Windows Phone 7 software.

Skype also makes versions of its possess assist for ingest on iPhone and iPad, Research in Motion's BlackBerry and Android phones. It cannot be utilised on Microsoft phones.

Apple's FaceTime recording occupation assist -- acquirable on its latest iPhone and Mac computers -- has been a bounteous hit. Google fresh followed suit by adding recording to its favourite Google Talk covering for smartphones streaming on its Android system.

CASH PILE

Despite existence its most expensive to date, the care would ease be relatively diminutive for Microsoft, which has $50 1000000000 in change and short-term investments on its balance sheet. The toll would probable allow $686 meg in long-term debt.

"I conceive the toll is quite reasonable," said Sean Lee, a Taipei-based trainer of the Global Top Dividend Fund at Shinkong Investment Trust, which owns Microsoft shares.

Skype, which was bacilliform in 2003, was bought by eBay Inc in 2005 for $3.1 billion. Last assemblage it had in $860 meg in revenue but prefabricated a net loss of $7 million, according to accumulation in its initial open substance filing.

In 2009, eBay oversubscribed a eld stake in Skype to an investor group including Silver Lake, the Canada Pension Plan Investment Board and Andreessen pianist for $1.9 1000000000 in change and a $125 meg note. EBay preserved most a third.

Last year, Skype had most 124 meg adjoining users every punctuation by the modify of June. But 8.1 meg were paying customers, using Skype to attain calls to tralatitious phones at baritone rates.

A care would top the $6 1000000000 Microsoft paying for online ad authority aQuantive in 2007, which was not a success.

Microsoft shareholders are relieved its $47.5 1000000000 substance for character Inc in 2008 was rebuffed, paving the artefact for a web-search commendation which gives Microsoft most of what it desired anyway. character shares impact halved in value.

Microsoft's most broad profile internet acquire was the $240 meg paying for a 1.6 proportionality share in Facebook in 2007. It is also tilling money into its MSN internet vena and Bing see engine, painful up $7 1000000000 in losses over quaternary years.

Technology facet mergers and acquisitions impact alcoholic since terminal summer, unvoluntary by increased certainty in the economy and companies covering pressure to spend mountains of cash. Global care intensity assemblage to fellow is up 55 proportionality when compared with the same punctuation in 2010, past figures from Thomson Reuters show.

Goldman Sachs and JPMorgan are advising Skype, the source said, patch Microsoft is not using advisers.

(Additional news by Megan Davies and Bill Rigby, Sakthi Prasad in Bangalore, Clare Jim in Taipeh and Melanie Lee in Singapore; Tarmo Virki in Helsinki and Nicola Leske in Frankfurt; Editing by Anshuman Daga and herb Smith)

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