Microsoft to buy Skype for $8.5 billion

BANGALORE, INDIA: 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.

Reuters first reported about the deal earlier on Tuesday, quoting sources.

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.