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Cisco Planning To Acquire Skype 148

rexjoec writes "Cisco is making a bid for Skype. The deal, if successful, would derail a planned initial public offering from Skype and redraw the battle lines in the lucrative market of video communications." The rumored price is $5B.
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Cisco Planning To Acquire Skype

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  • I'd love to see them release a new iPhone just for the hell of it :p

    • Re:iPhone by Cisco? (Score:5, Informative)

      by Luckyo ( 1726890 ) on Thursday September 02, 2010 @01:21PM (#33453616)

      Skype already had a working implementation on the world's biggest mobile plarform, as symbian application called fring allowed you to essentially tunnel into your skype account and make phone to pc, pc to phone and phone to phone video calls on any symbian mobile phone with front facing camera (which is pretty much any decent nokia made in the last 4 years).

      At some point, folks at skype decided that they didn't want to be a source for free video calls over 3g and blocked fring. But to actually need to make a phone when all you need is to allow integration into already existing phones for money... why?
      Video calls already worked for mobile phones over skype for a while (and apparently work again over fring itself as it added the functionality recently, but fring still seems to lack PC endpoint application). They could probably set up a small charge for every time you video call a phone with data connection, though I suspect that they have to hurry before one of the small start ups like fring grabs enough of the market and becomes skype of the mobile world.

    • by mlts ( 1038732 ) *

      How about a Skype application that does end to end encryption from the VoIP server to the cellphone? This would definitely be the killer app. This way, management can talk plans to a sales guy making a deal in Latveria without the Elbonians listening in.

      • You mean you can talk to extremists on the other side of the world without the government listening in...nope, not happening.
    • I'd love to see them release a new iPhone just for the hell of it :p

      A Linksys router with a VoIP phone jack, built-in camera, and monitor out might be a possibility.

    • by crossmr ( 957846 )

      I've got the CIT400 iPhone which I use all the time. It's fantastic. I bought a couple a few years ago and gave one to my parents. Living overseas with an unlimited calling plan on skype is great, but having this phone is even better. Especially since it's DECT, which means no standard interference from 2.4Ghz things.

      Cisco really should have pushed their skype phone lines more. They're great, and decent quality. They're now impossible to find. So I really hope it doesn't die anytime soon on me.

  • I am not sure how I feel about this, we could see sweet void phones from cisco, on the other hand they could really killy Skype. Oh well I guess we have google voice now right?
  • by wshs ( 602011 ) on Thursday September 02, 2010 @12:59PM (#33453190)

    They do this with pretty much every company they buy. Psionic and Riverhead come to mind quickly for me. The only reason they kept the Linksys brand was because they had no competing product at the time.

    • Re: (Score:3, Insightful)

      by bsDaemon ( 87307 )

      I recently bought an E1000 802.11n wifi ap/router, which is ostensibly a Linksys product, but unlike other Linksys products I've used in the past, this one has the Cisco logo on it in a fairly conspicuous manner, and linksys.com now redirects you to home.cisco.com. I don't know if that's an indicator that they might be planning on phasing out the Linksys brand or not though. Probably not. I think the best parallel I can come up with would be the 'Squire' brand of musical instruments, which is produced by

      • With Squire, you get a Fender lookalike guitar with the Fender brand association for 100 GBP instead of 400+ GBP. You get what you pay for, they're fine for beginners/amateurs.
    • I wish this was my area of expertise.. I'd make something just so they'd come buy it from me. And then I'd make a new one.

    • by Kepesk ( 1093871 ) on Thursday September 02, 2010 @01:15PM (#33453514) Homepage
      Buying up companies at a frantic pace seems to be the hot trend among powerful corporations.

      Soon there will only be two corporations: Microsoft-Cisco-Skype-NBC-Pepsi-McDonnalds-Halliburton-Friskies Corp and Apple-AOL-Time-Warner-CBS-CocaCola-BurgerKing-BP-FancyFeast Corp.

      Then you'll start getting weird messages on your computer... "You better not buy Fancy Feast." "We saw you drink that Pepsi."
      • Re: (Score:3, Insightful)

        by Idiomatick ( 976696 )
        :( your future includes AOL. I can't subscribe to your beliefs.
      • by mlts ( 1038732 ) * on Thursday September 02, 2010 @01:37PM (#33453886)

        The reason companies do the buying is that R&D is so heavily penalized in the US, due to tax breaks, liability, and other things. If a small company puts out a product, it is better to wait to see if they face lawsuits, then buy them if nothing happens as opposed to creating a product for a new market.

        Plus, American companies are shackled to the fact that they have to make a profit quarter per quarter, or shareholders can sue the company in the ground. Buying a company is a lot easier to explain to the accountants and board members as opposed to charging off some chunk of change for a R&D facility for new products that won't have an ROI for 5-10 years.

        • by tjb ( 226873 )

          Plus, American companies are shackled to the fact that they have to make a profit quarter per quarter, or shareholders can sue the company in the ground.

          When has that ever happened? Real citations, from places other than your ass, please.

        • by pclminion ( 145572 ) on Thursday September 02, 2010 @04:47PM (#33456974)

          Plus, American companies are shackled to the fact that they have to make a profit quarter per quarter, or shareholders can sue the company in the ground.

          And I have to make monthly mortgage payments or the bank will take my house away. See me complaining?

          If you don't want to be shackled by shareholders, don't trade your shares publicly. As a public company you are subject to the investing acumen and superstitions of the general public -- you're basically taking a loan from thousands of "John Smiths." And of course these people just want to see profitability in the short term.

          If I came in here bitching about losing my house because I couldn't keep my creditors happy, you'd tell me to grow up, and if I didn't want to be subject to their whims, maybe I should finance my home myself. But when the same thing happens to a corporation you pity the poor little corporation. Weird.

        • Re: (Score:3, Interesting)

          by kamochan ( 883582 )

          The same applies also in Europe, even if for slightly different reasons (labor costs and liabilities). R&D is expensive for big corps, and growth is expensive for small corps.

          This leads to most start-ups having a business strategy of doing R&D with a skeleton crew, then getting bought by big corp X. Where X is often known from the moment the start-up is launched. Any business done before the exit stage is purely to prove the validity of the developed solution. A tech start-up without an exit strateg

          • This is also the plan of most venture capitalists. VCs are not looking to watch a company grow long-term. They are looking to buy into a company at the startup, and sell it for several times the original price in just one or two years.
      • I thought only Taco Bell would survive the restaurant wars...

        • You've been watching too much demolition man.

        • by gtall ( 79522 )

          It depends upon how many cockroaches are running the company. Beyond the Cockroach Horizon, the company cannot be killed....think Microsoft, Bank O' America, Citibank, etc.

      • by TooMuchToDo ( 882796 ) on Thursday September 02, 2010 @01:43PM (#33454004)

        The problem is cash sitting around doing nothing. NPR was running a story yesterday talking about how the top 120 companies have over $1 trillion of cash sitting around, and investors are demanding they either distribute it to them via dividends or invest it via mergers and acquisitions. So, yeah, if it's either earning 0.5 percent in a money market account or buying up a ton of relatively cheap companies with the potential for a much larger return, you go on a spending spree and buy up whatever you think is going to have a decent ROI.

        • Re: (Score:3, Insightful)

          by Kepesk ( 1093871 )
          Actually, another part of the reason (and I've seen this first-hand in the monster corporation I work for) is that they want to buy up little companies with good ideas before their competitors do. Sometimes all they do is buy it up and shut it down; they don't want to use the company's assets, they just want to prevent competitors from using those assets.
        • Re: (Score:3, Insightful)

          by h4rr4r ( 612664 )

          Or here in reality; Mergers and Acquisitions mean big deal closing payouts to C level execs and paying dividends to investors don't.

          • All depends on the C level folks. Some are downright fucking morons (I'm looking at you Mark Hurd. Who screws with their expense account records when you make an 8 figure salary?). Some (like Warren Buffet) have a knack for picking out value and growing it in an ethical manner. As always, YMMV.

        • by afidel ( 530433 )
          Meh, warchests are fine if you eventually do something with them, think what would have happened if Apple had liquidated and distributed it's ~$3B in cash (more than the market cap at the time) instead of investing in OSX and the ipod.
      • Re: (Score:3, Interesting)

        by GameboyRMH ( 1153867 )

        Hahaha you should read Jennifer Government by Max Barry...

      • by Gordo_1 ( 256312 )

        Your nightmare already exists. it's called Proctor and Gamble: http://www.pg.com/en_US/brands/index.shtml/ [pg.com]

  • by onionman ( 975962 ) on Thursday September 02, 2010 @12:59PM (#33453196)

    Certainly seems like Google saw this coming from a long way off given that they have been working hard to integrate Skype-like features into gmail.

    It makes me wonder how many Cisco/Skype executives were using gmail accounts...

    • Re: (Score:2, Interesting)

      by BrokenHalo ( 565198 )
      Given that I'm not that keen on participating in Google's data-mining projects, I am underwhelmed by Google Voice offerings. Skype (despite its various failings) offers a comprehensive voice (and video if you want it) or chat connection that is independent of your browser, and thus is to an extent more or less insulated from your other online habits. Skype can be swallowed up by pretty much anyone other than Google (so long as those services remain intact) and I'll be content.
  • Anyone wanna revisit why eBay bought 'em in the first place? Did ya just wanna say WTF? Cisco is probably a good fit though. I just hope my home service still works as needed. I bought a GE router with the Skype software in it, bought a SkypeIn number and haven't paid Verizon a bill in 2 years.
    • Re: (Score:2, Interesting)

      Anyone wanna revisit why eBay bought 'em in the first place?

      eBay bought Skype for $2.6 billion and is now rumored to be on the verge of selling it for $5 billion.

      I would imagine the reason eBay bought Skype is something along the lines of "to make $2.4 billion dollars profit" though I could be mistaken.

      • by Wumpus ( 9548 ) <IAmWumpusNO@SPAMgmail.com> on Thursday September 02, 2010 @01:39PM (#33453918)

        Somebody is going to make around $3 billion on this, but it isn't going to be eBay, who sold Skype last year for $2 billion, which was less than what they paid for the company when they bought it.

        • by tyrione ( 134248 )

          Somebody is going to make around $3 billion on this, but it isn't going to be eBay, who sold Skype last year for $2 billion, which was less than what they paid for the company when they bought it.

          eBay didn't sell Skype outright. They will be making a profit in this transaction.

          • by Wumpus ( 9548 )

            OK, you're right - they still hold about 30% of Skype. They sold 65% at a loss, although figuring how much they lost is giving me a headache. Skype has been profitable while it was owned by eBay, making the math even more headache inducing. And eBay never paid the full purchase price of $4 billion, either.

            At this point, I'm glad I'm not an accountant.

            • They sold 70% for $2.025 billion (http://www.ebayinc.com/content/press_release/20091119006361), and had bought 100% for $2.5 billion (http://investor.ebay.com/ReleaseDetail.cfm?ReleaseID=176402). That seems to be a profit to me, on the 70%. How is it a loss?

              • by Wumpus ( 9548 )

                I believe they also paid some of the performance-based earn-out, which if paid in full ($1.4 billion) would have made it a loss. They would have had to pay less than $300 million or so to make the recent transaction a profit, ignoring Skype's profits. I don't know how much they actually paid, but I know it wasn't the full amount.

      • Uhhh, acquiring a billion dollar company isn't like buying and selling stocks. Organizations like eBay don't drop that kind of dough just to buy low and sell high. Those kinds of acquisitions are done because they're either strategic (lock up related markets, deprive competitors, etc), or because it adds value to existing business.

        eBay buying Skype seemingly fit neither of those molds (unlike, say, the Oracle purchase of Sun), and so its absolutely valid to question why they made the original purchase.


      • eBay bought Skype for $2.6 billion...

        And took a writeoff on the investment of $1.4 billion making their investment worth considerably less.

        To be honest I think $2.6 billion would be too high a price even now. Skype reported net income of $13.2 million on about $400 million in revenue. It's growing but $5B would be a very high price. A typical "fair" price is between 1-2X revenue to use the simplest possible analysis. (5-7X EBITDA is also used but profits aren't high enough here to make that useful). M&A folks typically use some multip

      • Is that their buy it now price?

      • by afidel ( 530433 )
        eBay sold skype in 2009 for $1.9B, a $125M note, and a 35% stake in the new company.
      • They could have just as easily lost $2.6bn, or even more than that given that Skype is a loss making company.

        My view is, if ebay shareholders want to make money out of viop companies, they can do so by buying shares in them. For ebay to justify buying them, they need to show why they can make more money out of it than skype on their own could. They said it was because they could integrate the skype service into their auctions so bidders could talk to the people selling the stuff. That didn't really happe

  • I welcome this. (Score:3, Informative)

    by jellomizer ( 103300 ) on Thursday September 02, 2010 @01:02PM (#33453242)

    Skype is rather Nasty to deal with if you have problems. If it is urgent there is no Voice support, And the email links to ask for a problem are vague and will lead you to the wrong path, and with horible auto replies that will just make you mad.

    While with Cisco sure you will be on hold for 3 hours but at least you can talk to someone and get it resolved.

    • Re: (Score:3, Interesting)

      If it is urgent there is no Voice support,
      If it's urgent then use your telephone! Or Windows Messenger. Or how about email?

      I rather enjoy Skype the way it is right now. Cisco is going to destroy Skype intentionally or accidentally by doing one of two things:
      1) Add Skype's technology into their products, stick a "Powered by Skype" sticker on the box, and kill off any consumer-level access Skype as we enjoy it now. Looking back at Cisco's purchases in the last decade and you'll see this is very likely.

      • Re: (Score:3, Insightful)

        by Ironhandx ( 1762146 )

        Really? I'm hoping they add built in Skype functionality to their routers. Cordless phones with the router as the base. Shit they could even bundle it. The market potential is HUGE.

        • by adolf ( 21054 )

          Really? I'm hoping they add built in Skype functionality to their routers. Cordless phones with the router as the base. Shit they could even bundle it. The market potential is HUGE.

          And this is better than an 802.11 wireless Skype handset and random router... how, exactly?

          • Its not necessarily any /better/ but it can be made easier to use. Put in skype uname/pwd in router setup wizard and never have to touch anything else, plug in the phone, push in the wireless network password and presto, done. Makes the skype phones cheaper since most everything could be handled router side and you can easily bundle it with 3 or 4 handsets like a lot of cordless phone sets come bundled now.

            Plus people are familiar with routers. Someone that might be a bit scared of wasting money on a skype

            • by adolf ( 21054 )

              I really think that it'd not that big of a deal.

              I say this having never configured an existing Skype handset, but, honestly -- really. Folks these days who are accustomed to handling 802.11-ish stuff are also accustomed to handling passkeys and entering them into random devices.

              The only other bit of info needed is a Skype username and password.

              Does it really make a marketable difference if this stuff is entered in a web browser or on a handset?

              And do folks who are already familiar with Wifi really want to

              • You have no idea how many people that use 802.11 stuff never actually configured it themselves do you? I know at least 5 people off the top of my head that can't/won't configure their routers even with the wizard on the cd.

                The whole point of this is that you can streamline it. They can buy skype service right from that wizard and use the cordless phone that came with the router right away. Skype has a good user base yes, but I'm banking on the fact that a lot more people would use it a lot more for telephon

    • Re: (Score:2, Informative)

      by wshs ( 602011 )

      With Cisco, you'll be on hold for 3 hours, until you read off your product serial number. Then they tell you you've reached EOL for the product in question, and offer to sell you an identical product whose only difference is the product number, at a vastly increased price. However, they won't tell you what the price is until you sign an NDA, because the gouge each customer differently.

    • While with Cisco sure you will be on hold for 3 hours but at least you can talk to someone and get it resolved.

      Depends on the level of support you need...

      If you've got a SmartNet contract with them, and your network is down, they get back to you fast.

      • by ophix ( 680455 )
        Obviously your company's experiences differ quite a bit from ours. Our experiences with Cisco's support for IOS bugs has left a rather bad taste in our mouths for any Cisco branded hardware. So bad that we switched all of our core routers over to another vendor and haven't looked back.
  • eBay buys Skype for 2.6 billion, loses a ton of money on it over a span of 5 years, now offload sit to Cisco at a profit. Genius!

  • I really thought they did and was waiting for the 'free' to go poof totally.

  • by countSudoku() ( 1047544 ) on Thursday September 02, 2010 @01:21PM (#33453608) Homepage

    Reports are surfacing that Oracle and Cisco attempted to purchase each other this morning and were destroyed in the clash. A very perturbed Larry Ellison had this to say; "When I saw they tried to purchase US I fell over into my zen rock garden and bumped my head pretty bad on a large decorative boulder." A spokeswoman for Cisco remarked; "They got database software all up in my router!" to which Larry replied; "Well, you got router all over my new Sun hardware biz!" Film at 11... AM, then lunch.

  • Odd that all the articles cite TechCrunch [techcrunch.com] as the source of the rumor yet this guy [barrons.com] from Barrons, says it's untrue.

  • Consider This..... (Score:5, Insightful)

    by Atomm ( 945911 ) on Thursday September 02, 2010 @01:31PM (#33453794) Homepage

    Cisco has a huge install base for business VoIP. Most of those businesses connect to land lines via traditional T-1 circuits. If Cisco integrated the Skype infrastructure with all those business customers, they could route calls over the Skype network bypassing the Telco's. From what I have seen, the average business long distance rate is 2-3 cents a minute. Cisco could charge 1 cent a minute and still make a fortune because they have such a large base of customers.

    Now, what if they did the same for International calling?

    I think it's going to move Skype away from Consumers and into the Business world where the real money is.

    • I think it's going to move Skype away from Consumers and into the Business world where the real money is.

      Not necessarily. Cisco certainly does more business with the corporate world, but look at Linksys: WRT-54 routers have been the Cadillac of home and small enterprise wifi for a decade, and Linksys is nothing more or less than the consumer brand-name for Cisco.

      If they treat Skype the way they treat Linksys, there's no reason to assume they'll do anything deleterious to private user's experience.

  • Cisco's hardware business will kill Skype, mainly because overpriced, state-run foreign telecom companies will demand it as a condition of buying Cisco hardware, just as they've successfully weaseled in spying kits into all their routers.
  • If it competes with their enterprise-level megabuck gear, I guess we can expect usability, features, and especially reliability, to spiral down the crapper.

    They did it to Linksys, after all.

  • Maybe not (Score:3, Informative)

    by Mike Van Pelt ( 32582 ) on Thursday September 02, 2010 @02:17PM (#33454544)

    This is a rumor from TechCrunch. Maybe there's something to it, maybe not. All the other news items reporting this seem to be quoting the one TechCrunch source. Another news item said "A Source Close to Cisco" said there was nothing to the rumor.

    http://blogs.barrons.com/techtraderdaily/2010/08/31/cisco-has-not-had-talks-about-acquiring-skype-source-says/ [barrons.com]

    • by JSBiff ( 87824 )

      Didn't TechCrunch put out another widely repeated rumor a month or two ago that turned out to be completely false? Seems like it was something else Slashdot reported (based on the TechCrunch source), but it was bogus. But, now I can't remember what it was. Racking my brain, but drawing a blank.

      • by JSBiff ( 87824 )

        Man, I just did a Google search for 'techcrunch rumor false', and got a lot of hits on different rumors. TechCrunch appears to be the high-tech industry equivalent of a supermarket tabloid?

  • Remember that head-scratcher about Cisco going after the iPad with a "business tablet"?

    And then remember the ask-Slashdot about how to do a Skype-dedicated device, and the answer was they all kind of blow?

    Perhaps that $200 Cisco 7900 phone on your desk might get a little more sexy.

    http://tech.slashdot.org/index2.pl?fhfilter=cisco+tablet [slashdot.org]

  • Skype leeches a little bit of bandwidth from a lot of organisations, which causes them all to need slightly more/bigger routers than they would otherwise.

    Cisco sells routers.

    What's the betting that the Skype protocol will get a bit less efficient each year from now on?

  • google semi-silently released their gmail call feature last week. *free* IP calling from your desktop to the US / canada. browser-based, simple, and just works. no mobile client, but hey, skype took it in rear w/ respect to android by only releasing a client for verizon, and then at an added cost.

    • google semi-silently released their gmail call feature last week. *free* IP calling from your desktop to the US / canada. browser-based, simple, and just works.

      Free for 2010 anyway, according to the notice I got when I was checking my email. The fact that they specifically said "Free for 2010" strongly suggests that come 2011, it won't be.

    • and it only works for international calls....
      • and it only works for international calls

        no, it works for domestic and international calls. it's only free to US and canada though.

  • Ok, Skype, kiss & make up with Fring so I can make video calls on my Evo again. Or release your own client for the same purpose. Get with the program, guys.

  • Wahoo! Now Skype can be moved off of their proprietary protocol on to an open standards compliant... oh, wait you said Cicso... never mind.

  • Cisco already sells telecom equipment... now it's going to become a telecom company? Sorry I vote no. Better to have a separate company and spin a ten year or more deal to be a major producer of corporate equipment.

    But thinking again about it I have to wonder maybe... but only if they do keep it a separate entity... they have enough money and clout to grow the company to later sell it off later for a profit... a successful Skype would mean a greater demand for tcp/ip telecom equipment... problem would be

  • rich shareholders and their ceo lackeys deciding and initiating takeovers, mergers etc. they dont even worry about customers and what they think.

    what if i ditch skype after this takeover ? what if millions do the same ?
  • lucrative market of video communications

    Has Skype ever made any actual real money? What is with the valuation?

    Now that Apple has thrown in as competition you pick now to take over this company.

    Enjoy Crack Much?

    • Oh yes and Google, how could I forget Google.

      So yeah. Overpay, for a company that doesn't make any money that competes now directly with both Apple and Google.

      Let me know how that turns out for you.

"I will make no bargains with terrorist hardware." -- Peter da Silva