Friday, May 6, 2011

Skype 'in Facebook and Google talks' Internet phone service in negotiations over link-ups that could delay Wall Street flotation, according to reports

Skype is in talks over a link-up with Facebook or Google, according to reports. Photograph: Paul Sakuma/AP
The internet phone service Skype is entertaining partnership talks with both Facebook and Google – delaying its $100m (£60m) Wall Street flotation – according to reports.
A deal to buy Skype outright is not thought to be in the pipeline, although one source "with direct knowledge of the discussion" told Reuters that billionaire Facebook chief Mark Zuckerberg had "been involved in internal discussions" about snapping up the video chat service. Such a deal could be worth between $3bn and $4bn, according to the Reuters source – which, if plausible, is illuminating about how much cash the social network has in the bank.
More likely is a joint venture between Skype and Facebook/Google. The Luxembourg-based company has longstanding partnerships with TV manufacturers including LG, Panasonic and Samsung to embed Skype into their products.
It is not hard to imagine Skype calling integrated into Facebook, for when the likes, wall posts and private messages just won't do. Both firms, too, have sizeable communities of engaged users: Facebook has more than 600 million registered accounts; Skype has 560 million, of whom about 124 million make calls in the average month.
Most troubling for Skype is its low conversion rate – only about 6% of its users actually pay for the service, something the company explicitly vowed to boost in its initial public offering prospectus last year. However, we shouldn't expect tie-ups with Facebook and Google to involve paid-for premium services – that's not how those companies operate.
A tie-up with Google is slightly less obvious. The Mountain View company already has GChat video-and-voice calling embedded into Gmail, though the feature is a little hidden behind regular instant messaging. Then again, Skype would slot nicely into the so-far-underwhelming Google TV and already has a place on Android smartphones.
Skype declared its intention to go public way back in August last year, since when a slew of new generation internet firms – including Facebook, Zynga, and Twitter – have worked up investor appetite for social media firms.
China's answer to Facebook, Renren, yesterday raised $743m with its flotation on the New York Stock Exchange, with shares immediately rocketing in the loss-making social network.
Unlike Renren, which has the added allure of a booming Chinese internet market, Skype is hoping to raise $100m with its initial public offering in the second half of this year. The IPO will value the eight-year-old firm at $1bn, according to reports.
The Canadian pension fund, Silver Lake and venture capital firm Andreessen Horowitz own a 56% stake in Skype, with 14% belonging to its original inventors, Niklas Zennström and Janus Friis.
Still in Skype's rear-view mirror is its fruitless $3.1bn acquisition by eBay in 2005 – and sale in 2009 – which will make the internet telephony firm wary of a wholesale buyout. eBay maintains a 30% stake in Skype.
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