Microsoft confirmed on Tuesday it has agreed an $8.5bn (£5bn) cash deal to buy internet telephony service Skype, the biggest deal in its 36-year history.

The acquisition will see Skype established as a separate business division inside Microsoft, dubbed Microsoft Skype, alongside XBox Live, Kinect and Windows Phone.

Tony Bates, the Skype chief executive, will become president of Microsoft Skype and report directly to the technology giant’s chief executive, Steve Ballmer.

“Skype is a phenomenal service that is loved by millions of people around the world,” said Ballmer. “Together we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world.

“Tony Bates has a great track record as a leader and will strengthen the Microsoft management team. I’m looking forward to Skype’s talented global workforce bringing its insights, ideas and experience to Microsoft.”

Bates added: “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.

The acquisition is subject to US regulatory approval, which the companies hope to secure later this year.

See: Guardian.co.uk

Also see: engadget

And: CNN Money