Last week it was reported that Facebook and Google were in competing talks to buy Skype, the pioneering video chatting and VOIP calling service, for $3 to $4 billion. Today we learn that both the buyer and the price were way off. Turns out Microsoft has agreed to purchase the company for a staggering $8.5 billion

The company which was launched in 2003 by Niklas Zennstrom and Janus Friis, the two guys behind Kazaa, will become a new business division within Microsoft with Skype CEO Tony Bates assuming the president of the Microsoft Skype Division role, according to The Wall Street Journal

This acquisition marks the most expensive deal in Microsoft's history. It is believed that Skype will be worked into a number of Microsoft's Internet services including Bing, Xbox Live, and Windows Phone 7, to compete with Apple's FaceTime and Google's Voice products. 

[via WSJ