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Microsoft is nearing a deal to buy Internet phone company Skype Technologies for more than $7 billion, and a deal could be announced as early as Tuesday, the Wall Street Journal reported, citing people familiar with the matter.

The Skype deal would rank at or near the top of the biggest acquisitions in the 36-year history of Microsoft, the WSJ said.

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The Wall Street Journal reported tonight that Microsoft–in what would be its most aggressive acquisition in the digital space–was zeroing in on buying Skype for $8.5 billion.

Sources told BoomTown tonight that the deal for the online telephony giant is actually done and will be announced early tomorrow morning.

The deal–which is being spearheaded in a closely held negotiations by Microsoft CEO Steve Ballmer, with an assist from top dealmaker Charles Songhurst–is a bold move for the software giant, which has struggled in its online efforts.

Skype, which had been headed bumpily for an IPO until now, will apparently be integrated into Microsoft’s Windows Live and other online communications efforts in both the consumer and enterprise arenas.

The deal is a big win for its recent investors, including Silver Lake Partners and Andreessen Horowitz.

At the time they made their investments, Skype was a huge legal mess with lawsuits flying.

Obviously, it has gotten cleaned up enough to attract Microsoft.

Others have looked at Skype, including Google, although acquisition interest by Facebook was overblown, said several sources.

Interestingly, Microsoft’s new smartphone partner Nokia also held meetings with Skype’s CEO Tony Bates, a former Cisco exec who arrived at the company relatively recently.

Interest in Skype by Microsoft was first reported by GigaOm’s Om Malik.

Tune in at 5 am PT for the press release, apparently, and lots and lots and lot of analysis.

More to obviously come…

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Sources also say that Microsoft has entered the mix and is interested in either partnering with, acquiring or investing in Skype. While they are late entrants to this game, Microsoft’s interest makes sense for several reasons:

Skype would givemMicrosoft a big boost in the hotly contested enterprise collaboration market places, thanks to Skype’s voice, video and sharing capabilities. It would be particularly useful for competing against Cisco and Google, two of its main rivals in the collaboration business.

It would give them a must-have application/service that can help with the adoption of the future versions of Windows Mobile operating system.

it would give Microsoft an outside chance of working with carriers, many of them looking to partner with Skype as they start to transition to LTE-based networks.

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The Skype forums are a hive of panic and abuzz with accusations that either the company is bundling crapware with its VoIP app or has a serious security problem. Users are reporting that a strange, new, and difficult to uninstall program is finding its way on to their PCs called EasyBits GO. EasyBits is the company that has powered Skype's games channel since 2006, but at least until now its wares have not been standalone software. One moderator has declared EasyBits Go is not part of Skype and suggested customers immediately run a malware scan, but mods are volunteers and not official representatives of the company, so we're taking it with a grain of salt. Another (later) post from a forum admin simply states that Skype is looking into the issue and will release an official statement, though we have no idea when that might actually happen and we're awaiting reply to our own request for comment.

It appears that a rep from EasyBits Media has taken to the forums to quell some of the outrage, but to no avail. Posts from the team are painfully vague, saying that it was part of an update to the gaming platform and apologizing for the misunderstanding, before linking directly to an .exe that it claims will remove the offending software. To say that forum users are wary of the executable would be an understatement (most responses have involved torrents of profanity). Reports are that the suspicious app is installing itself without any approval from users, but we can't confirm this since any attempts to install in our lab of doom resulted only in errors while downloading. For now, we'll just have to wait for word from Skype, and the company better move quick -- the pain of the recent outage is still fresh in many customers' minds.

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Microsoft has drastically overhauled the network running its Skype voice-over-IP service, replacing peer-to-peer client machines with thousands of Linux boxes that have been hardened against the most common types of hack attacks, a security researcher said.

The change, which Immunity Security's Kostya Kortchinsky said occurred about two months ago, represents a major departure from the design that has powered Skype for the past decade. Since its introduction in 2003, the network has consisted of "supernodes" made up of regular users who had sufficient bandwidth, processing power, and other system requirements to qualify. These supernodes then transferred data with other supernodes in a peer-to-peer fashion. At any given time, there were typically a little more than 48,000 clients that operated this way.

Kortchinsky's analysis, which has not yet been confirmed by Microsoft, shows that Skype is now being powered by a little more than 10,000 supernodes that are all hosted by the company. It's currently not possible for regular users to be promoted to supernode status. What's more, the boxes are running a version of Linux using grsecurity, a collection of patches and configurations designed to make servers more resistant to attacks. In addition to hardening them to hacks, the Microsoft-hosted boxes are able to accommodate significantly more users. Supernodes under the old system typically handled about 800 end users, Kortchinsky said, whereas the newer ones host about 4,100 users and have a theoretical limit of as many as 100,000 users.

"It's pretty good for security reasons because then you don't rely on random people running random stuff on their machine," Kortchinsky told Ars. "You just have something that's centralized and secure."

Kortchinsky discovered the Linux supernodes using a Skype probing technique he and colleague Fabrice Desclaux first demonstrated in 2006. (PDF versions of conference presentation slides are here and here.)

Kortchinsky's discovery comes as Microsoft said it's investigating recent demonstrations of an exploit that exposes the local and remote IP addresses of users who are logged in to the service. The attack reportedly relies on the open-source SkypeKit package.

A farewell to decentralized P2P

The banishment of user-supplied supernodes comes as the number of people simultaneously signed into Skype has mushroomed over the past year. According to Skype Journal's Phil Wolff, that number hit 41 million at the end of last year, a 37-percent jump from the average number of concurrent users when Microsoft acquired Skype last May. Within weeks of the announcement of the $8.5 billion deal, a software crash left many users unable to use the service.

The changes raise a variety of questions about the suitability of peer-to-peer technology to run services that small and large businesses increasingly rely on to route sensitive calls and messages. Microsoft representatives weren't immediately available to comment on the changes observed by Kortchinsky, which were documented in a blog post published on Tuesday.

"It will definitely bring more stability and security and it may also bring more clients," Kortchinsky said of the changes.

Microsoft has not yet responded to our request for comment on this story.

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