Microsoft agrees to buy Skype for $8.5 billion

SAN FRANCISCO (AP) - Microsoft has agreed to buy the popular Internet telephone service Skype for $8.5 billion in the biggest deal in the software maker's 36-year history.

Buying Skype would give Microsoft a potentially valuable communications tool as it tries to make a bigger splash on the Internet and become a bigger force in the increasingly important smartphone market.

The sellers include eBay and private equity firms Silver Lake and Andreessen Horowitz.

Skype boasts about 663 million users worldwide. According to regulatory documents, Skype users made 207 billion minutes of voice and video calls last year.

Most people use Skype's free calling services, which has made it difficult for the service to make money since entrepreneurs Niklas Zennstrom and Janus Friis started the company in 2003.

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