Steve Ballmer (left) and Tony Bates in San Francisco on Tuesday. (Reuters)

New York, May 10 (Reuters): Microsoft plans to buy Internet phone service Skype for $8.5 billion in cash, a rich price as it seeks to regain ground on growing rivals such as Google.

Microsoft’s interest in the money-losing but popular service highlights a need to gain new customers for its Windows and Office softwares. Skype has 145 million users on an average each month and has gained favour among small business users.

Investors expressed skepticism over the deal, sending Microsoft shares down slightly. “It doesn’t make sense at all as a financial investment,” said Andrew Bartels, an analyst at Forrester Research.

“There’s no way Microsoft is going to generate enough revenue and profit from Skype to compensate.”

The sale marks a big payday for Skype’s owners, online auction site eBay and a group of investors, including Silver Lake, the Canada Pension Plan Investment Board and Andreessen Horowitz.

Skype delayed plans for an initial public offering that was expected to value the company at more than $3 billion. It had been looking at other options, including tie-ups with Facebook and Google. Such a deal was expected to value Skype at $3 billion to $4 billion.

The Luxembourg-based company, which allows people to make calls at no charge and has developed premium services, would give Microsoft a foothold in the potentially lucrative video-conferencing market as businesses shift to lower-cost ways of communicating.

Skype could be combined with a Microsoft software such as Outlook to appeal to corporate users, while the voice and video communications could link to Microsoft’s Xbox live gaming.

Longer-term, Skype would offer Microsoft another route to develop its mobile presence, an area it has already put more energy and resources into as PC use comes under threat.

Skype is set to become a new business division within Microsoft with Skype chief executive Tony Bates in charge and reporting directly to Microsoft CEO Steve Ballmer, Microsoft said. The Skype deal is the biggest in the 36-year history of the world’s largest software company.

Skype, which was formed in 2003, was bought by eBay Inc in 2005 for $3.1 billion. Last year it had in $860 million in revenue but posted a net loss of $7 million, according to data in its initial public offering filing.