It’s still just a rumor, but repotedly Cisco is aiming to acquire over-the-top VoIP pioneer Skype before its upcoming planned IPO. The rumor was first reported on TechCrunch.com and of course triggered rounds of speculation. Now that the initial spin has died down, it’s interesting to ask: Is now the right time for Cisco to be making such a purchase, a deal that just a few years ago would have probably ticked off its enterprise customers and infuriated its carrier partners.
First, here’s a bit more on the rumor:
Skype insiders are hoping for an out of the gate valuation of $5 billion or so, we’ve heard. Presumably Cisco would have to bidding in that range to make it interesting.
Google was also rumored to be sniffing around Skype, but antitrust concerns may have persuaded them not to make an actual offer.
Connected Planet’s take,
Rich Karpinski:
This would indeed be a shocker but also a much better fit for Skype than eBay (major understatement there).
But would it make sense for Cisco from a “portfolio” perspective, in terms of how it fits with its current business and customer base? A few years ago, you could easily argue no. But much has changed recently, making this not only a bold move by Cisco, but a potentially shrewd one.
- It’s core VoIP business in the enterprise is solid. Sure, it faces competitors such as Microsoft, Avaya and others, but there will be no mixed messages about Skype somehow “being” its enterprise VoIP play. Enterprises understand the difference between over-the-top Skype and the VoIP/unified communications solutions Cisco is delivering.
- Telecom service providers are no longer “freaked out” by Skype. Yes, players like Skype have hurt the landline business. As has mobile. Not to mention the economy. But telecom operators are no longer holding onto the voice business for dear life. They have other higher-margin fish to fry — data, video, mobile, services, etc. — and can afford to let voice slowly slip away. Verizon Wireless has even cut a partnership with Skype — imagine that happening a few years ago.
- There’s actually a nice synergy between Cisco’s intelligent IP network vision and the need to * help * over-the-top (and especially real-time) services like Skype thrive in tomorrow’s networks. Cisco’s core IP/router business, particularly in the carrier market, is more about intelligence and quality of service than mere throughput (though of course bigger, 100 gig pipes help all boats rise). So, for instance, helping telecom operators build networks that can more flexibly reserve bandwidth and set up on-the-fly QOS levels for services like Skype is a potentially great software and services business for Cisco, a level of value above mere bit-mover. As it’s leveraged its WebEx acquisition to learn more about unified communications (not to mention its Flip video buy to understand some consumer video trends), owning and operating Skype, even at an arm’s length, would teach Cisco and its customers much about the future needs of more intelligent IP networks.
That’s our take on this. Let us know what you think in the comments section below: