MicroSkype: Microsoft pays $8.5 billion for Skype, to make Xbox, Win 7 phone, Outlook more social [Updated]

Microsoft just acquired Skype for a cool $8.5 billion in cash, which includes the popular Voice-over-IP service's debts and creates an entire business division just for the company at Redmond (Microsoft Skype Business), as reported by GigaOm.

See more ZDNet coverage:

• With Skype, Microsoft's multiplatform strategy solidifies
• Microsoft buys Skype for $8.5 billion; creates new business division
• Microsoft's purchase of Skype: One expensive game of keep away

Just why did Microsoft drop so much money for a company that always seem to be on the market the past couple of years (its most recent owners include original founders Niklas Zennstrom and Janus Friis, who reacquired most of the shares from eBay in 2009)? Once you get past the sticker shock, the deal does make business sense for both companies. After all, while Skype has over 663 million (170 million per month) global users and are on many mobile devices, only 8.8 million users pay for the service according to its April SEC filing, so it needs to expand to remain competitive.

Microsoft, on the other hand, have many products that can use Skype's expertise in video chat/conferencing and VoIP (without paying for use of Skype's patents), as suggested by GeekWire and GigaOm:

• Xbox 360 Kinect + SkypeTV: There is already a video chat feature on the Kinect but a Skype-login and interface could encourage more people to make this a part of their Xbox experience. Skype is already on some televisions so integration with the Xbox seems to be a good fit.
• Windows 7 OS + Nokia + Skype: This could be quite a powerful combination as more and more smartphones are equipped with front-facing cameras and make use of the 4G network, which means video calls will only become the norm on mobile devices. Plus, it gives the partners an edge against Apple's proprietary Facetime application. Skype users are also able to send SMS messages from the Web to handsets so this could be a great bonus for future customers with Nokia phones running Windows 7.
• MSN Messenger + Skype: Hopefully, Messenger will be replaced with Skype because IMing on Skype is a breeze but uninstalling Messenger from machines running Windows is a hassle. The combination of Messenger and Skype users will give G-Chat and Google Voice some competition (perhaps to finally roll out to more countries).
• Outlook + Skype: By integrating your Skype contacts with your email address book to make voice and video calls, Microsoft is looking to the beefed up Outlook to better compete with Gmail/G-Chat/Google Voice.
• MS Lync, Xbox Live + Skype: These new groups will expand Skype's user base, according to the press release.