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Is Skype in Play?

TechCrunch's fearless leader Michael Arrington is reporting that Mark Andressen's venture fund is looking to be a part of a larger consortium of investors that wants to buy Skype before eBay spins it out as an IPO.

While this could be a short term win for eBay, a company that I'm convinced has the blind staggers, it won't be in their shareholder's best interests.

First off Skype is a brand that is growing in stature each day. As more and more people use Skype, the value of the brand increases, even if the minutes paid for drops as Skype to Skype calls potentially increase. Given they are still increasing and their day by day sales means more people are using more minutes to call others not on Skype or forwarding calls via Skype Out to their mobile phones.

Second-JoltID was good for Skype as a P2P technology, but it makes Skype an island and not a part of the contiguous landscape of telephony. Skype has to constantly interconnect to the rest of the telco world. So while Skype and their Estonian braintrust knows more about the Internet's inner workings, and maintains a better nerve center than most online companies that monitors traffic conditions and more, eventually they will ditch Jolt and switch to a more standardized platform ala SIP. As a brand, as long as it works like Skype, just like why consumers switch to Vonage, because it works like a phone, and costs less, the public won't care. My contention is simply this--you really don't care which brand of spark plug is in your car, and often you don't know. People who use mobile phones don't know if it's a Nokia-Siemens switch or an Ericsson switch any more than in the USA they don't know the difference between CDMA from Verizon and Sprint vs. GSM from AT&T and T-Mobile. To the public the mobile phone works like, well, a mobile phone.

Third-Skype could make the switch to SIP and as long as the service worked the same (or better) and as long as the customer and user experience didn't change one bit, and as long as the call quality remained high, the public using Skype won't leave them.

Fourth-The fact that eBay bought Skype without Jolt ID will likely result in a huge shareholder suite. Those of us who bought eBay stock believed they bought all of Skype and what the founders had put into it, not kept the core technology outside the deal. This seriously questions the due diligence process and the way the story was told in filing made by eBay to the SEC. To sell off now, to private investment would dramatically reduce the upside potential and in turn that would be diminishing what Skype could make back to eBay to help stave off or offset a shareholder greenmail suit.

Fifth--Buying up Skype with venture fund money is bad for the venture economy. It means a large chunk of cash that was designed for early stage companies is being put into an already more mature entity. That's not venture capital, that's investment banking or private equity.

Sixth- Very few VC's are currently of the mindset to be directors of a company the size of which Skype has become. Their hands-in approach, which is often needed in early stages of a companies. As directors good VC's play roles by being a director of the startup where they are constantly getting involved in tactical issues that affect the every day issues of the companies they invest in versus the role of a director of a large publicly traded company. There they are charged with the setting of long term vision of the business thus presenting diametrically opposing approaches requiring a very different operational mindset. This means a complete behavior change has to occur in the way they would do business.

I for one think Skype's best exit is an IPO from eBay. Josh Silverman has demonstrated a solid vision and plan, and seems to be executing on that plan, which is why the sharks are swimming around the Valley trying to wrestle Skype away from Ebay. These are largely the same people who made money on the sale of Skype to Ebay. For that reason it's important to separate what Ayn Rand called "greed" and "anti-greed" as the latter is a very dangerous and destructive form of capitalism, that slows down the economy and prohibits competition.


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