Microsoft announced today that it will acquire Skype for $8.5 billion marking the largest acquisition in the company's history.

Skype runs the giant global videoconferencing and voice communication network that has 170 million subscribers and logged 207 billion minutes of conversations last year, according to the company.

The service is free, though the company has a paid offering for premium services such as establishing multipoint conferences and communications with non-Skype users.

Microsoft's decision to buy Skype was unexpected, through rumors started swirling yesterday of a possible deal. Although Skype, through its investor group Silver Lake, had been considering an initial public offering, there were also rumors in recent days that Facebook and Google were interested in acquiring the company.

Also, Microsoft has its own communications technologies including Lync for enterprise customers and Windows Live Messenger, but the acquisition of Skype promises to extend that footprint, Microsoft CEO Steve Ballmer said in a prepared statement.

"Skype is a phenomenal service that is loved by millions of people around the world," Ballmer said. "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." .

Full story: Redmond