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Skype Offers New Business Service as Cisco Merger Rumor Floats

By Richard Martin
August 30, 2010 - News

Pushing its business services to a wider audience, Skype said its Skype For SIP offering, rechristened Skype Connect, has been officially launched. Originally released in beta form last year, Skype Connect enables enterprise users to make free or low-cost VoIP calls and to manage their phone systems through an online interface. Skype, which now has more than a half-billion users, is moving into corporate telephony in an attempt to boost its revenue as it prepares for a planned IPO.

The Skype Connect news was partly overshadowed today by a report on the TechCrunch blog that Cisco is eyeing a possible offer for Skype. VON/xchange sources on Monday, however, indicated that Cisco insiders are denying the report of a possible offer for Skype. Neither Cisco nor Skype has commented on the record.

While it is unquestionably the most successful, in terms of usage, of all the next-generation VoIP providers, Skype has struggled to match its popularity with profits. The company now handles more than 12 percent of all international voice traffic, according to research firm Telegeography. The company filed for a $100 million IPO earlier this summer.

Based in Luxembourg, the VoIP provider has moved aggressively into business services in the last year. In its filing, Skype said it had $406.2 million in revenue in the first six months of this year. It netted income of just $13.1 million, however, and Skype CEO Josh Silverman has some distance to go to prove that his company can “continue to develop new monetization models for our large connected user base," as the company said in its filing.

The IPO has been anticipated since the company was bought from eBay by a private equity group that includes Silver Lake Partners and Andreessen Horowitz in November 2009. A Cisco offer would derail the IPO process and marry the world’s largest provider of network equipment to the world’s largest VoIP provider. Cisco has moved into communications services since its 2007 acquisition of nline conferencing and collaboration company WebEx.

TechCrunch claimed that “Skype insiders are hoping for an out of the gate valuation of $5 billion or so." That would nearly double the valuation placed on the company by the eBay spinout, which was about $2.75 billion.

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