Voicespan

A few days ago Ebay sold a majority shareholding in Skype to a group of investors. They made a (relatively speaking) modest profit on their initial investment if you take writedowns into account, which a number of analysts have criticised, implying that they should have made a lot more money out of such an apparently successful business as Skype.

I’m not so sure about that, though. For a start, it’s fairly apparent now that the initial purchase wasn’t the best piece of business done by Ebay. Somehow, they failed to notice that their $3 billion or so investment (initially over $4 billion, but $1 billion or so was never paid) did not include rights to the P2P technology at the heart of Skype. This erupted recently, with Skype’s original owners and current technology rights holders suing Skype.

Neither did Skype seem to be a great fit in Ebay’s portfolio. Aside from the fact that they are both technology companies, it’s difficult to see how to integrate the businesses more than superficially.

So, handing a controlling share over has made the litigation someone else’s headache, and there is not compelling need to integrate the businesses now. And, as I mentioned, they didn’t lose any money to boot. Pretty smart, in my book.

But wait, that’s not all. I mentioned already that Skype is profitable, but if you delve down a bit you’ll see that it’s not nearly as profitable as it should be. For every subscriber that hands over some cash for SkypeOut or one of the other services, there are maybe 10 who purely and simply use Skype as a means of making free calls to family, friends or even business colleagues. Try as it might, Skype can’t convince a greater proportion of it’s user base to cough up the readies.

This may be why Skype is making tentative moves into the business market. When company communications are on the line, most business owners will happily pay a small amount to guarantee the service. However, Skype has yet to build a large enough installed base to make Skype appear on everyone’s list of possibilities. The quickest and easiest way of doing this is to give it away, which is a lot more expensive to Skype that allowing consumers to download the software for free. Businesses expect security and support at a much higher level that Aunt Mabel in Brisbane does.

Of course, the biggest issue for Skype in the business world is that it does not use open standards, namely SIP. Skype is correct in saying that SIP has NAT traversal issues, etc. But if a business is aware that the majority of it’s partners use SIP-compliant systems, thus allowing for free calls back and forth with other SIP-compliant companies, then investing in Skype (however cheap) does not make sense. Going down the SIP route is a tough call for Skype, as the fact that no other software can make a call to a Skype user is how the business was built. But remember the P2P litigation? That might be the push that Skype needs.

Interesting times at Skype HQ.