Microsoft clinches deal to buy Skype

Microsoft has finalised the deal to buy internet telephony service Skype for $8.5bn (£5.2bn).

The software giant announced in May that the deal was underway but it would take some time to get the merger in place. Microsoft chief executive Steve Ballmer explained: "Skype is a phenomenal product and brand that is loved by hundreds of millions of people around the world.

"We look forward to working with the Skype team to create new ways for people to stay connected to family, friends, clients and colleagues – anytime, anywhere."

The internet telephony service, which offers free and paid-for calls to landline and mobile phones has around 663m users worldwide was set up in 2003. Ebay, the internet auction site bought Skype for $2.6bn in 2006, before selling 70 per cent of it in 2009 for $2bn.

Skype's chief executive Tony Bates will stay on with the company and have the title of president of Microsoft's Skype Division. Microsoft has not said how it will merge Skype into its existing products yet but it is expected the company will integrate the service into products such as Hotmail, Office and possibly even its next operating system Windows 8.