Cisco to buy Skype?

Rumors of a potential acquisition surface as Skype readies for an initial public offering.

By Kim Peterson Aug 30, 2010 1:02PM
Telephone © CorbisThis one's still in the rumor column, but some news sites are reporting that Cisco (CSCO) has swooped in with an offer to buy Skype just as Skype heads toward 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.

More from MSN Top Stocks:
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

126
126 rated 1
286
286 rated 2
474
474 rated 3
680
680 rated 4
626
626 rated 5
609
609 rated 6
620
620 rated 7
462
462 rated 8
304
304 rated 9
132
132 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
BIDUBAIDU Inc10
BXTHE BLACKSTONE GROUP L.P10
CELGCELGENE CORP10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.