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Tuesday, March 11, 2008

Google : All Skype-d up?

The market is abuzz with the news regarding Google’s supposed buy-out of Skype. Considering the fact that Skype in itself is the Google of PC-to-PC calling, it comes as little surprise that Google decided to buy it from eBay, which had earlier overestimated its market value and gone ahead to pay $2.6 billion (plus an additional $530 million for performance levels, which was negotiated and reduced from the initial figure of $1.7 billion) and acquired Skype in September, 2005. It had then gone on to add approximately 220 million users to Skype’s then existing customer-base of 60 million within two and a half years. Skype has till date provided its users with over 1 billion minutes of talktime inclusive of PC-to-PC and PC-to-Phone calling. The revenues earned by Skype for eBay are approximately $79 million in the first quarter and $90 million in the second quarter of 2007, fairly good going as far as cost recovery is concerned.

While this might seem all hunky-dory till now, here comes the crunch. It defies all logic to see why eBay is selling out one of its most potential-bearing products (apart from up4sale and CARad) to Google. While transacting with one of the major players in the market might seem as a healthy proposition, it’s the selling-out part that appears slightly out-of-the-way. There is also another area of concern regarding the fact that the value of Skype has been written down by $900 million, which is a big reduction considering what eBay had paid for it, to say nothing of inflation and cost-effectiveness since Skype was acquired.

The question now arises, why is eBay negotiating with Google to sell-out Skype? One of the main reasons that seems to be the prevalent one, is the fact that Skype has approximately 280 million users according to the latest statistics and Google talk has approximately 976,000 users and could seriously benefit from Skype’s database. The second reason could be a potential fusion of Google talk and the Skype software, which would do a lot of value-addition to both the brands.

The fact still remains that eBay’s sell-out of Skype might, and will raise, some serious questions. While Skype has not proven to be inefficient in any manner, it could be a matter of concern for all Skype users as to whether there is something seriously wrong in the hugely popular application regarding which it is being sold.

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