Monday, August 30, 2010

Oh Snap! Cisco Wants to Buy Skype Now Too? For Realz??

On the heels of Cisco's acquisition of Extend Media, rumor has it that the data-networking giant has made an offer to acquire Skype before the Internet telephony company makes an IPO, which they just announced on August 9. Mike Arrington reported the news this morning from reliable sources, and said that while TechCrunch has not been able to confirm this rumor, it's not surprising because companies, "in lock down during the IPO process, is usually even more tight lipped than normal." Arrington cited Skype insiders who valued the company at $5 billion or so.

Skype itself made a big announcement of its own today with the official launch of Skype Connect 1.0., the enterprise version of its VoIP (Voice over Internet Protocol) telephony service that had been in beta since March 2009. Skype Connect, connects Skype to IP-enabled private branch exchange (PBX) or Unified Communications (UC) systems, which are standard telecommunication infrastructures for voice calling across organizations. Skype Connect already has 2,400 active global users and is certified to work with PBX and UC products from many companies, including Cisco.

Skype has been growing steadily with 560 million users and 8.1 million of those users pay an average of $96 a year for premium services. Skype generated $13 million in profit on net revenues of $406 million in the first half of 2010.

If the TechCrunch rumor is true, adding Skype to its portfolio would give Cisco access to Skype's worldwide enterprise and consumer network, a popular brand with potential celebrity spokespeople (like Oprah), and would integrate with its unified communications suite of tools for web conferencing (WebEx), videoconferencing (Tandberg) and Telepresence for business customers. Cisco estimates that by 2014, video will comprise of 57% of Internet traffic company and sees the potential for a $30 billion video communications market.

The VAR Guy was thinking the same thing as I was in his post, Cisco Systems: Buying Skype for Low-End Video Conferencing? | The VAR Guy:
"So, why might Cisco be taking a look at Skype? The answer is simple: Web-based video conferencing.
  • At the very high end of the market, Cisco continues to promote telepresence executive conference rooms that can cost $200,000 or more per location to deploy. Gradually, Cisco has extended its telepresence strategy to the mid-market and to lower-end systems.
  • At the very low end of the market, Cisco acquired the Flip video camera. The goal: Make video incredibly easy to produce, so that consumers and businesses load up the web with even more video — driving even more demand for Cisco’s broadband networking solutions."
Garrett Smith of VoIP Insider, saw a lot of synergy between the two companies on a variety of levels, in his post, Skype Would Make Great Acquisition for Cisco, including target growth markets (small business in particular), technology dependent customers (noting a possible mashup of technologies, "Imagine a wireless Flip that allowed for mobile Skype video calling."), proprietary technology and consumer brand.

Another possible consumer play could be for video chat in the living room. Earlier this year at CES 2010, Skype announced a partnership with HDTV makers Panasonic and LG to bring its popular video chat software to the living room featuring an embedded version of Skype 4.2. Also at CES, Cisco demonstrated a home TelePresence system that it said would be rolling out trials this year, with Verizon in the U.S. and with France Telecom.

Bernie Arnason of  Telecompetitor cited out other possible integrations of Skype with Cisco's IPTV and set-top boxes, Linksys routing equipment and numerous broadband products that could be Skype "certified".

Back in April 2008, I wrote about the rumor that Google might Buy Skype?, when eBay was getting ready to sell, but that ultimately did not happen. There was a great deal of speculation then like there has been today. But what about Google? There was some talk of Google making an offer, but backed away due to anti-trust concerns. Google actually added a new VoIP phone calling feature from Gmail last week, which already had video chat capability. According to Google, over one millions calls were placed within 24 hours of the launch. The service is free in the U.S. through 2010 and is 2 cents/min on international calls, and I have to say it's worked flawlessly every time I've used it. Clearly, Google has stepped into the ring to duke it out with Skype in the voice and video chat market.

Richi Jennings of Computerworld, collected a sampling of analysis from the IT and tech blogs that you can read here: Cisco to buy Skype, pre-IPO? (and lock out) and see the links below.

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