Microsoft Corp. and Skype Global announced on Tuesday that they had entered into a definitive agreement under which Microsoft will acquire Skype, a leading Internet communications company, for $8.5 billion in cash from the investor group led by Silver Lake. The agreement has been approved by the boards of directors of both Microsoft and Skype.

Skype will become a new business division within Microsoft, and Skype chief executive officer Tony Bates will assume the title of president of the Microsoft Skype Division, reporting directly to Steve Ballmer, chief executive officer of Microsoft. The acquisition of Skype will allow Microsoft to offer more communication options for users of Windows-based personal computers, Windows Phone-based smartphones and other platforms supported by the world's largest designer of software.

“Microsoft and Skype share the vision of bringing software innovation and products to our customers. Together, we will be able to accelerate Skype's plans to extend our global community and introduce new ways for everyone to communicate and collaborate,” said Tony Bates.

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. Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms.

With 170 million connected users and over 207 billion minutes of voice and video conversations in 2010, Skype has been a pioneer in creating rich, meaningful connections among friends, families and business colleagues globally.

The acquisition will increase the accessibility of real-time video and voice communications, bringing benefits to both consumers and enterprise users and generating significant new business and revenue opportunities. The combination will extend Skype’s world-class brand and the reach of its networked platform, while enhancing Microsoft’s existing portfolio of real-time communications products and services, the two believe.

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. Skype has made impressive progress over the past 18 months under Silver Lake’s leadership, increasing monthly calling minutes by 150%, developing new revenue streams and strategic partnerships, acquiring the intellectual property powering its peer-to-peer network, and recruiting an outstanding senior management team.

Tags: Microsoft, Skype, Ebay, Windows, Windows Phone, Silver Lake