Late last year, just when Amazon’s Kindle was starting to take off in a big way, people began to suggest that an iPhone application was all set to take on Amazon and win. While we remained skeptical, it seems Amazon wasn’t taking any chances.

Just last month, Amazon launched an application for the iPhone. Lexcycle, the developer of Stanza, an eBook reader app for the iPhone and iPod, yesterday told users that the company had been acquired by Amazon.com. Stanza allows users to read public domain books downloaded from the internet. Supporting a whole range of formats (Amazon Kindle, Mobipocket, Microsoft LIT, PalmDoc, Microsoft Word, Rich Text Format, HTML, and PDF) and with a library of over 100,000 books, Lexicycle soon became one of the most popular free apps in the App Store.

“We are excited to join forces with a company that has innovated on behalf of readers for over a decade and is a pioneer in ebooks,” wrote the Lexcylce developers. “Like Amazon, we believe there is a lot of innovation ahead for ebooks and we could not think of a better company to join during this exciting time.”

Just as an FYI for Stanza users, you don’t have to worry about suddenly catching Kindle-itus as a result of the buy-out. Lexcycle says that despite the acquisition, the company won’t be making any changes to the app.

“We are not planning any changes in the Stanza application or user experience as a result of the acquisition,” the blog post assures users. “Customers will still be able to browse, buy, and read ebooks from our many content partners. We look forward to offering future products and services that we hope will resonate with our passionate readers.”