Microsoft to acquire Skype for $8.5 billion in its biggest deal ever

Microsoft Corp agreed to buy Internet telephone company Skype for $8.5 billion in cash in its biggest deal ever, as the technology giant seeks to plug a hole in its mobile offerings.

Buying loss-making Skype would have no immediate impact on Microsoft's finances, but would make clear its intention to compete with rivals such as Apple Inc and Google Inc. The Skype deal is the biggest in the 36-year history of the world's largest software company.

Microsoft already has video chat as a function in its Windows Live Messenger service, but it is not available on its Windows Phone 7 software.

Skype also makes versions of its own service which can be used as an application on the iPhone and iPad, Research in Motion's BlackBerry and Android phones. It cannot be used on Microsoft phones.