Cisco May Buy Skype

Telecom & Wireless

Published: August 30, 2010 8:14 am

The media is full or rumors that Cisco (NASDAQ: CSCO) could by Skype. Cisco has a history or M&A, and Skype would fit with its move into consumer voice and video communications. Cisco has diversified from selling enterprise routers to telecom and cable companies to the business of set-top boxes, home Wi-Fi, and personal video conferencing

Skype was spun out of Ebay (NASDAQ: EBAY) a year ago. Skype has been said to be planning its own IPO. TechCruch reports that the price for Skype would be $5 billion. Skype’s revenue this year is expected to be $800 million.

The move is dangerous. There are a number of providers of free voice service. Skype is the largest with 500 million subscribers but Googe (NASDAQ: GOOG) has just launched a free telephone voice service as part of its GMail service. MSN and AOL Mail are likely to follow suit to remain competitive.

Skype’s core business has become a commodity and a commodity that will be worth very little very soon.

Douglas A. McIntyre

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