Why Microsoft is paying $7.5M for 600,000 IP addresses

Microsoft is dropping more than a few jaws with the news that it’s spending $7.5 million to acquire 666,624 IP addresses, the behind-the-scenes routing numbers associated with specific devices connected to the Internet. The deal emerged from Nortel Networks’ bankruptcy proceedings.

Here’s the word from Dayne Sampson, the corporate vice president for Microsoft Global Foundation Services, which includes its data center operations: “Microsoft continues to assess opportunities to acquire useful assets, whether they are from Nortel or other sources, to support the tremendous growth of our online services, particularly enterprise cloud services.”

The purchase price translates into more than $11 for each IP address. To put that in context, it’s more than the base cost of domain names from ICANN, the Internet Corporation for Assigned Names and Numbers.

Why so much? These are IPv4 numbers, and the last of them have been handed out by ICAAN, making them increasingly scarce — and valuable — as the shift to the larger-volume IPv6 system takes longer than expected. Microsoft outbid four other companies on the full block of IP addresses, according to the Domain Incite report that broke the news.