IT company Microsoft has reportedly closed a $8.5bn deal to acquire the internet telephone service provider Skype.

Speculation has been rife in the tech world for months about the acquisition of Skype. Last week, there were several reports that Facebook, Google and Cisco Systems were in the ring to buy Skype.

The deal would be the biggest ever by Microsoft, which has traditionally preferred small purchases over big ones. In 2007, the company had paid $6bn to purchase online advertising company aQuantive.

However, analysts have raised concerns that the deal could be an over-paid one.

Skype, which was launched in 2003, recorded losses last year. It lost $7m on revenue of $860m. The company also has debt of $686m, which Microsoft would assume in the purchase.

Most people use Skype’s free calling services. Few months back, the company announced that it would introduce a video conference calling service that would allow a group to talk, see each other and also share documents.

The Wall Street Journal first reported about Microsoft’s interest in Skype and the deal. The Guardian reported the closure of the deal, citing sources.

The acquisition is expected to be announced soon.