May 09, 2011

Skype Acquisition Rumor Mania Surges Again


I was shocked, simply shocked to hear Skype was/is trying to get bought by Facebook and Google rather than going through an IPO. I mean it’s only been nine months since the company filed a S-1 with the SEC for an IPO, but doesn’t it feel like much longer?

Turn the clock back to the end of August 2010, and rumors were flying that Cisco was looking at buying Skype for the low-low price of only $2 billion – roughly double the company’s valuation from around 2009, when Skype was bought back by its founders and Silver Lake. I thought it was a crazy idea by any stretch of the imagination due to the high price for a mere $8 million paying customers. 

Fortunately, someone performed an intervention with Cisco on buying more consumer-facing companies or Cisco realized it was crazy to pay so much for a company which, when bought by eBay, turned out to have an IP (intellectual property) skeleton in the closet.

Last week, Reuters reported Facebook and Google were looking over Skype and this week Om Malik is fanning the fires with more crazy talk that Microsoft should buy Skype.

OMG, STOP THE MADNESS, PEOPLE!

If talks with Facebook and/or Google had gone well, we’d be reading about a company acquisition already, not “they’re having talks.” Nine times out of ten, when people are talking in public about “talks” for acquisition, there’s no deal on the table because people have been talking so long that everyone hears about it at the water cooler.

I can’t see Google paying a premium for Skype. Not its style. It’d be a big big deal fraught with uncertainty. Google has the cash to do it outright, but it tends to buy small and then take a year to figure out exactly what to do with the acquisition.

Facebook is a more interesting buyer. Skype could roll into Facebook as a dedicated audio and video application, there’s some cash kicking off from the nickel-and-penny minutes business and Facebook understands the whole model of consumers and little payments.   But if Skype were so attractive to Facebook, why did Facebook do a deal with T-Mobile to enable audio calling with Vivox on the back end? 

As for Om Malik’s valuation of Skype at $7 billion to $8 billion dollars and his assertion Microsoft is looking at buying Skype. You can read his latest blog post here, but I’m skeptical. Microsoft already has a mobile deal with Nokia in the works, so adding Skype makes as much sense as its acquisition of WebTV back in the day. 

Maybe Om is right and Skype is simply trawling for a last-minute cash injection before an IPO. If so, it’s not a bad strategy for both Skype and a to-be-named investor, which could see some quick upside if Skype goes through with a public offering this fall.


Doug Mohney is a contributing editor for TechZone360 and a 20-year veteran of the ICT space. To read more of his articles, please visit columnist page.

Edited by Carrie Schmelkin



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