Microsoft Buys Skype For $8.5 Billion

In the biggest deal in its history, . announced Tuesday that it is acquiring Skype Global for $8.5 billion in cash.

The Internet communications company had 170 million users and more than 207 billion minutes of voice and video calls in 2010, the companies said in a statement announcing the deal.

“Skype is a phenomenal service that is loved by millions of people around the world,” Microsoft CEO Steve Ballmer said in the statement. “Together we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world.”

Skype will become a new business division within Microsoft, and Skype CEO Tony Bates will become president of the Microsoft Skype Division, reporting directly to Ballmer.

Skype will support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices, and Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities, the companies said.

Founded in 2003, Skype was acquired by eBay in September 2005, and then acquired by an investment group led by Silver Lake in November 2009.

For more on the deal and what it means to Microsoft, check out coverage from GeekWire and theWall Street Journal.