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Skype: The Rodney Dangerfield of Telecom

Rodney
The worst thing that ever happened to Skype was eBay’s decision to acquire it for $3.1-billion.

In an instant, Skype went from being cool and disruptive to a wildly over-priced acquisition that made little strategic sense for eBay. While eBay has struggled to figured out how Skype fits into the scheme of things (and taken a $1.4-billion writedown on the deal), Skype has evolved into a solid, growing business with revenue last year of $375-million, 276 million registered users, and 100 billion minutes of calls generated over the past five years.

Yet Skype receives little or no respect for being one of the few bright lights within the telecom industry, which makes it the resident Rodney Dangerfield, whose catch line was “I don’t get no respect”. You rarely see stories about Skype’s growth or how well it’s managed to do despite becoming an orphan within the eBay empire. Instead, the focus is always on how eBay paid too much, the writedown and how Skype makes no strategic sense for eBay.

The question facing eBay and its new president, John Donahue, is what to do with eBay (and StumbleUpon and Craigslist, for that matter). Do you sell Skype, and wash your hands of an acquisition that made little sense. Do you keep it, and try to grow the crap out of it?

TechCrunch, which loves nothing better than a juicy M&A rumour, is reporting Google could be in talks to buy or partner with Skype. It’s hard to tell whether there’s anything to the speculation given it seems to be based on the where there is smoke, there is fire approach.

The biggest issue for eBay is doing something with Skype that doesn’t make them look like strategic idiots again. If Donahue going to get off to a solid start as president, he needs to do something with Skype that looks smart, savvy and pragmatic.

Given Google’s interest in telecom (GrandCentral, GTalk, wireless spectrum etc.), Skype could make sense at the right price. Of course, it made sense for Google a few years ago when Tim Draper, one of Skype’s early investors, was running around Silicon Valley boldly suggesting Skype was worth $1-billion.

More: Silicon Valley Insider suggests Skype could be acquired for $3.1-billion to $4-billion, which would let eBay walk away with its head held high.

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  • http://skypejournal.com Jim Courtney

    Well, Skype “don’t get no respect” except from Oprah. She is now using Skype’s recently introduced High Quality Video for remote interviews on both her regular show and a ten week evening webcast class about Eckhart Tolle’s book “A New Earth”

    You can read about this and all the other Skype news that’s “not about eBay’s non-strategic acquisition” over at Skype Journal.

    In practice they are doing very well on the technology front, especially the High Quality Video. Over the past year Skype has also made many improvements to its audio — the most noticeable being introduction of full echo cancellations. And the new Skype 3.8 beta for Windows has even more audio quality improvements which even “ordinary” people are noticing.

    As for the business side, we have to hope that new CEO Josh Silverman, who only started a week ago last Monday (Mar 24) is able to figure out how to turn Skype into a real business to bring it up to a valuation that would make Google pay even more billions to acquire it.

    Full disclosure: yep, I have to admot that I write a lot of those posts on Skype Journal.

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