Cisco to buy Skype?
Rumors of a potential acquisition surface as Skype readies for an initial public offering.
The TechCrunch site says that it heard about the offer from "reliable sources" and that the acquisition would have to be huge, since Skype insiders are hoping for a cool $5 billion valuation from the IPO. Another news site, VentureBeat, says it was also able to get confirmation of the offer from sources.
Cisco shares are down slightly in midday trading. Guess investors aren't that impressed with the rumor.
Skype filed plans to go public earlier this month. The online calling company was once owned by eBay (EBAY), but after an investment group acquired it, there was little doubt an IPO would materialize.
I think a Cisco acquisition makes plenty of sense. Cisco is a huge Internet networking company and makes many of the routers and other infrastructure in use today. Skype could help Cisco expand its corporate services as well as reach out to a new consumer base. Post continues after video:
But, as Om Malik points out, buying Skype could put Cisco in competition with its own customers, particularly phone and cable companies (Cisco already owns WebEx, which develops videoconferencing and online calling services).
But would Skype even consider Cisco when there's potentially $5 billion on the table in an IPO? I'd say yes, if for no other reason than Google (GOOG).
Google became an instant competitor to Skype last week when it launched online calling through its Gmail service. Some people thought it was the death knell for Skype, but that's going a bit too far. Google is going to be a formidable rival, one that Skype will have to work hard to beat.
That might have taken a bit of the shine off of the Skype IPO. Cisco's corporate presence and customer base would give Skype a huge advantage over Google. If the offer is sweet enough, I'm sure Skype will consider the deal seriously.
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