Would Cisco Really Buy Skype?

August 30th, 2010 by · 1 Comment

According to an article by TechCrunch last night, Cisco Systems (NASDAQ:CSCO, news, filings) has made a pre-IPO bid for Skype (news, filings) [a subsidiary of MicroSoft (:MSFT, news)] .  Now, it's hard to discount the possibility given that Cisco has been buying everything that isn't nailed down and superglued just in case.  It has also been rumored that Cisco has bid for Skype once before, and there are no structural reasons why they couldn't do this out of petty cash.  I'm just having trouble finding a convincing rationale *for* such a deal.

What exactly would Cisco get out of owning Skype?  I mean, aside from the fact that Skype is cool and has remained cool even after it outgrew the title 'startup'.  I use it myself on a regular basis, and I gladly pay money for services they provide.  But why would Skype be more valuable to Cisco than as a standalone entity?  If Skype is, as rumored, looking for a $5B valuation in their proposed IPO, would it be worth more than that to Cisco when they actually crunch numbers?

I suppose the place to look would be in the overlap/integration between telepresence and video chat.  Cisco may have in mind a brave new world of conferencing where everything works together on any device and any budget, and Skype could play a big role in such a vision.  But that's a fast moving target that I'd hate to have to quantify the synergies for.  

Actually, the drawbacks are a bit easier to come up with.  Cisco's main customers are telcos of various stripes who have voice revenues.  With Skype in Cisco's hands, the equipment behemoth would be competing with its customers for those.  More metaphysically, Skype became a phenomenon partly because of its position outside the status quo, and it lost some luster (though only some) under Ebay's wing.  Why would that not be likely to happen again?

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Categories: Mergers and Acquisitions · Telecom Equipment · VoIP

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