Earlier this week I reported an update on the status of the EU Commission approval, indicating that it appeared there would be no conditions placed on Microsoft’s acquisition of Skype. Today the final ruling came out with details behind the EU decision.

In their decision it is interesting to note they split out the consumer and enterprise markets:

In the area of consumer communications, the investigation found that the parties’ activities mainly overlap for video communications, where Microsoft is active through its Windows Live Messenger. However, the Commission considers that there are no competition concerns in this growing market where numerous players, including Google, are present.

For enterprise communications, the investigation confirmed that Skype has a limited market presence for these products and does not compete directly with Microsoft’s enterprise communication product Lync, which is used mostly by large enterprises.

As regards conglomerate effects, the Commission assessed the possibility for Microsoft (i) to degrade Skype’s interoperability with competing services and/or (ii) to tie its own products, in particular its leading Windows operating system, with Skype, thereby limiting other players’ ability to compete.

As regards consumer communications services, the Commission found that Microsoft would not have an incentive to degrade Skype’s current interoperability as it is essential for Microsoft that Skype’s services are available on as many platforms as possible in order to maintain and enhance the Skype brand . As regards the risk of tying or bundling, the Commission noted that the vast majority of consumers who acquire a PC with Skype already installed are registered Skype users and that most of them subsequently download a version different from the pre-installed one. Therefore, the proposed transaction will not change the current situation.

As regards enterprise communications services, the Commission found that Skype is currently not an enterprise product, therefore its interoperability is not decisive for competitors and a bundle or a tie between Skype and Microsoft’s products will not be a must have product for enterprises. Furthermore Lync faces competition from other strong players in enterprise communications, such as Cisco.

The Commission also assessed other ways with which Microsoft could leverage Skype’s large consumer base onto the markets for enterprise communications services but it ruled out negative effects on competition in the time frame relevant for the analysis of the transaction.

In other words the commission concluded:

• Skype would degrade its own brand by failing to continue support for the multiple platforms on which it is currently and potentially available as as service
• Skype has  made such significant market penetration that users who would encounter a pre-installed Skype on a PC would probably already have a Skype account and want simply to upgrade to the latest version.
• Skype is not an enterprise product – confirming that, when it comes to the business market, Skype really has been a small business product at best.
• Any attempt to leverage Skype’s consumer base into the enterprise market would not negatively impact competition.

Microsoft General Counsel  and Vice-President Brad Smith has commented:

We’re pleased that the European Commission has approved Microsoft’s acquisition of Skype. This is an important milestone, as we’ve now received clearance from both the United States and the European Union. We look forward to completing soon the final steps needed to close the acquisition, bringing together the employees of Microsoft and Skype, and creating new opportunities for people to communicate and collaborate around the world.

Bottom line: Microsoft is free to do as it wishes in terms of the integration of Skype into their business. At this point it’s really up to Microsoft, working with its Skype business unit, to determine how to successfully leverage Skype into Microsoft’s enterprise (and consumer) offerings to achieve the increased market adoption that justifies an $8.5B purchase price.

Related articles

• European Union approves Microsoft’s Skype deal (winrumors.com)

Last month’s announcement of Microsoft’s acquisition of Skype certainly triggered speculation, misplaced blame and other conspiracy theories on the blogosphere. It often sounds like a reporter wants to use Microsoft as the most convenient excuse for a post or article. It’s superficial, to say the least. Until Microsoft completes the acquisition, Skype operates as an independent but fully operational company, complete with warts.

Having participated in the major restructuring of a NASDAQ-listed company (and some subsequent acquisitions) and the acquisition of one of my previous clients by a NASDAQ-listed companies (as well as having supplied due diligence information for acquisitions of some of my previous employers’ customers) I’ve had a chance to walk through these exercises.

This post is simply my perspective on the challenges involved in closing such a deal and the short term benchmarks I am looking for in order to measure the impact of the acquisition.

First, some public facts,

• Last fall Skype announced the appointment of Tony Bates as its new CEO. Tony brings many years of business leadership experience with a major (and disruptive) player in the IP-communications space. He has certainly participated in, or been an observer to, some of Cisco’s acquisitions.
• Skype signed a long term lease for new office space in Palo Alto and moved there last December.
• Skype has been on a hiring spree for the Palo Alto office with respect to product managers and developers/engineers.
• On May 10, 2011 Microsoft and Skype announced that Microsoft would be acquiring Skype for $8.5 billion, acquiring a Luxembourg-based company, using cash that Microsoft has kept in Europe (or at least has not repatriated to the U.S.).
• Microsoft has built up a significant Bay Area presence at its Mountain View campus and is in the same time zone as Redmond.
• Last week the FTC filed a notice of early termination, without comment, effectively announcing there would be no objection on their part to closing of the deal.
• Until the deal closes, Skype CEO Tony Bates is and remains in charge, making the key decisions re ongoing business operations; it’s still an independent company reporting to its current investors. (Microsoft could incur legal liability were they to interfere in Skype’s decisions prior to the close.)

Today has seen a plethora of third party posts about executive changes at Skype. However, in the course of an acquisition by a publicly listed company, Skype’s hands are tied by the securities regulators as to what they can say. The only response has been “As part of a recent internal shift, Skype has made some management changes”. On the other hand my first hint of change came when one executive wrote two weeks ago, in his Skype Mood Message, to the effect that he would not be anywhere near Palo Alto at least until August 1.

We spoke with one [current investor] just now who reiterated what other unnamed investors have said in the press this morning: That the decision was 100% Tony Bates’ call. Until the Microsoft deal closes, he has to run Skype like a stand alone company, and these were all executives he’d been considering firing for performance for some time. The timing had more to do with how long it took to go through the process than anything else, this investor said.

And, he noted, that these were all people on the business side of the house, not the technical side of the house. That indicates he was trying to fix part of the company [that] wasn’t working, rather than a wholesale firing of people who stood to get big payouts.

But I’ve seen all this before at other restructurings and acquisitions. In the course of closing the transaction C-level management figures out – some before the close, some after:

• the resources you need and what is duplication, what needs to be merged
  • what is critical to maintaining Skype as an independent business unit and the internal business relationship with other Microsoft business operations
  • how to maintain a culture that encourages innovation and nurtures employee morale
• what policies need to be brought into line with respect to human resources, financial reporting, IT services. marketing and other corporate infrastructure services
• performance of due diligence on all contracts, agreements and outstanding legal disputes – this is the most challenging aspect as these will always raise issues that need to be resolved before closing – and
• clearing regulatory hurtles. While the U.S. FTC has cleared the transaction, there would have to be some EU regulatory clearance required, given that the actual transaction will occur between a European registered company (Skype LLC) and a European subsidiary of Microsoft.

But overriding through all this is the need to not only continue the Skype business operations but also determine how to put together the team and resources that will grow the business. Of significant importance is ensuring the ongoing business operations – as measured by revenues and expenses – do not impact the initial financial basis for the transaction at the time of close.  When I was involved in a restructuring and an acquisition the final question that had to be answered for any of my proposals was the impact on sustaining and growing the business.

In particular, Microsoft CEO Steve Ballmer will be under tremendous pressure to have success with Skype. After all, there is an $8.5 billion investment – the goal has to be both to recover this amount as profits and to generate shareholder return on the investment. This is achieved by not only continuing and enhancing the current user experiences vertically with upgrades and new services but also leveraging Skype technology through horizontal integration  into Microsoft Office, Lync, and Windows Live offerings. The bottom line is that any decisions during the transition and going forward will have to provide answers to that ultimate goal. And, if Tony Bates is to remain President of the Skype business unit at Microsoft after the close, he is going to have to live with his decisions during the closing period.

My real short term benchmarks will be Skype’s delivery of new and upgraded products over the next few months. Here’s what’s on the line:

• Developing a Skype for Mac 5.x that addresses a plethora of user interface issues, the most important of which is making the user interface consistent with the Skype for Windows 5.x user interface.
  • Skype Journal has an update on the Skype for Mac chat style contest.
• Evolution of Skype for Windows – beta version 5.5 with deeper FaceBook integration announced this morning.
• Launch of Skype for iPad – an iPad-specific version that takes full advantage of the iPad’s display format and iPad 2’s video features – a heavily used Google search keyword is “Skype for iPad” -  demonstrating the demand and expectation is there.
• Upgrades to Skype for iPhone (restoration of the keypad on Skype-to-Skype calls) and Skype for Android.
• Launch of Skype for Windows Mobile 7
• Launch of third party applications and hardware that incorporate SkypeKit
• Skype for Business customer success stories; we simply have not seen any since the Skype Connect launch last fall.
• Actual launch of announced services such as: Go To Meeting integration for collaborative desktop sharing, Skype for TV for Comcast cable customers.

Bottom line: It’s real easy, and naive, to blame Microsoft for recent outages and other Skype service interruptions.  When it comes to the Microsoft acquisition of Skype, we are simply going to have to wait out the process – securities regulations place limits on how much information can be made public. Investors and users have to hope the right business decisions are being made during this period; it’s really a matter of C-level management bringing the appropriate skills and experience to the table. This is a situation where trust in the C-level executives to make the right decisions is paramount. In the interim, Skype remains an independent business operation with its CEO in total charge.

But at least the above benchmarks provide some short term benchmarks that are indicators of how Skype will continue to support and upgrade services to its user base. And these benchmarks contribute to passing the ”AmberMac” test.

Update: Shel Israel expresses his perspective in Microsoft Acquires Skype.

Related articles

• Steve Ballmer & Tony Bates Talk About Skype-Microsoft Deal (gigaom.com)

Where have all the Skypers gone? Long time coming back
Where have all the Skypers gone, one day ago?
Where have all the Skypers gone?
Skype crashes have closed them, everyone.
Oh, when will they ever come back?
Oh, when will they ever come back?

Paraphrased with apologies to Pete Seeger.

It’s a popular 60’s folk song that comes back to mind when one wonders how large a “small number” is?  The initial post from Skype about this service interruption (which has had three updates) read:

A small number of you may have problems signing in to Skype. We’re investigating the cause, and hope to have more details to share soon.

What was termed in Skype’s blogs as a “small number of you” appears to have become a significant portion of Skype users online. Have a look at this trend chart (based on Users Online data collected by Hudson Barton at Borderless Communicator):

June 6 represents a typical pre-interruption day. June 7 shows the impact of the outage on Users Online. June 9 shows a shortage of about 4 million users throughout the day (will be updated as the day progresses).

But there is one other Skype statement that I have to dispute:

If you were disconnected from Skype earlier, you shouldn’t need to manually sign back in to Skype – it should reconnect automatically when it’s able to do so.

Personally I found that when I went to Skype on my two Windows PC’s and clicked on the application, it effectively crashed with the dialogue box shown on the right. I checked with a couple of other users (one in France, one in North America) and they had the same experience. Automatic reconnection was not happening.

Based on the rare previous experiences when I had seen this, something was causing Skype for Windows to crash when one attempted to go to the Skype client once the interruption had commenced.

But there is one other learning from my experience with Skype (especially with project I was managing a few years ago). There are many installations of Skype, especially in business environments, where Skype has been installed on a PC yet rarely used, if ever. However, Skype is sitting in the background, logged in (because the default setting of Skype is to log on when Windows opens) but never used.

Somehow I suspect that these users of Skype have been either logged out or their Skype has crashed and they don’t realize it. These users need to somehow shut down their Skype and relaunch it; but given their lack of awareness, they may not come back online until the next time their PC is rebooted which may be several days from now. Just my “gut” hunch but definitely worth considering.

Bottom line: if these trends continue this interruption may effectively be a Refresh to tell us how many “truly active” real users are online. I’m sure Hudson will keep an eye on the situation and see what bears out by the weekend. In any event it’s a challenge for Skype to get these 4 million users back online using Skype.

Question: Is 18 million (or ~ 65%) of users  – the Users Online deficit at 18:30 GMT Tuesday – a “small number”?

Meanwhile I’ll dig out my old Kingston Trio (or was is Peter, Paul and Mary) recording of “Where Have All the Flowers Gone?’

Related articles

• “Skype Has Stopped Working”: Another Service Interruption (voiceontheweb.biz)
• Skype Login Disruption Update: User Friendly Fixes Becoming Available (voiceontheweb.biz)
• Skype is Having Another Outage Today – Appears Widespread (But May Be Recovering) (disruptivetelephony.com)

Earlier today I blogged about the Skype Login Disruption that occurred this morning. Seems like Skype’s developers got onto the issue pretty quickly with the announcement on Skype’s Heartbeat Blog this evening:

• An update of Skype for Windows is available immediately.
• An update of Skype for Mac will be available tomorrow is now available.
• Updating Skype for Linux will continue to require a manual update.

Update: May 27: Skype’s Heartbeat blog reports on the Skype for Mac 5 upgrade. Also ensure you have Skype for Windows 5.3.0.116, released early this morning to address an auto-installation issue with last nights update.

Kudos to the Skype developers for getting on top of the issue and doing the software updates so quickly and to Skype corporate for communicating the issue and the fixes as they became available.

Hopefully each fix such as this builds a little more robustness into Skype.

Oh, and it had nothing to do with the Microsoft acquisition.

Related articles

• Skype faces second big outage, already has fix (electronista.com)
• Skype Outages Worldwide & How To Fix App Crashes For Windows/Mac [News] (makeuseof.com)

Seems like the robustness of Skype has been mildly challenged once again. About an hour ago it became apparent that some Skype users were having issues with logging in. Skype has identified the problem according to their Twitter account.

And a later Tweet:

In the interim Skype has released, on its Heartbeat blog, a temporary, if mildly challenging technologically , fix:

Skype is aware that a select number of users are experiencing problems. They have identified a manual fix so people can follow these instructions if they continue to have issues logging on:

Windows Vista and Windows 7

1.    Close Skype.
a.    Right-click the Skype icon in the system tray (at the bottom right of the screen)
b.    Choose Quit.
2.    Ensure that “Show hidden files and folders” is switched on.
a.    Click Start, select “Run” and press Enter.
b.    Type “control folders” and click OK.
c.    Select the View tab and ensure “Show hidden files and folders” is enabled.
3.    Locate the shared.xml file.
a.    Click Start, type run and press Enter.
b.    Type %appdata%\skype and click OK.
c.    Delete the shared.xml file.
4.    Restart Skype. The shared.xml file will be recreated.

Windows XP

1.    Close Skype.
a.    Right-click the Skype icon in the system tray (at the bottom right of the screen)
b.    Choose Quit.
2.    Ensure that “Show hidden files and folders” is switched on.
a.    Click Start and then Run…
b.    Type control folders and click OK.
c.    Select the View tab and ensure relevant entry is enabled.
3.    Locate the shared.xml file.
a.    Click Start and then Run…
b.    Type %appdata%\skype and click OK.
c.    Delete the shared.xml file.
4.    Restart Skype. The shared.xml file will be recreated.

Mac OS X

1. Quit Skype.
2. Go to the folder ~/Library/Application Support/Skype/
3. Delete the file shared.xml (it will be recreated once you open Skype again, this is fine).
4. Start Skype.

Please note that the ~ sign means your home folder. You can find your home folder by opening Finder and selecting Go > Home from the menu bar or pressing Command (Apple), Shift and H keys at the same time.

Skype’s unofficial “real users” tracker Hudson Barton shows how this issue has slowed down Skype Logins this morning:

We’ll provide an update once the issue has been resolved. During the time that I wrote this post the number of users online has risen from 23+ million to over 24.7 million.

But the voice conversation system has gone a long way in terms of reliability since the 1930’s. My mother’s cousin was hired by Bell Canada upon graduating from Engineering Skule^TM in the 1930’s because he had figured out a way to prevent the phone system from breaking down due to streetcar vibrations. Apparently when installing the initial phone network in Toronto in the 1920’s and ‘30’s, they would install the phone lines in the streetcar track beds. And breakdowns in the business core of Toronto were frequent.

Hopefully with each of these issues Skype becomes just a little more robust as a result of the fixes.

At least Skype is onto the issue and keeping us informed via both their PR agency and Twitter.

Over at Disruptive Telephony, Best Practices Chair of the VoIP Security Alliance, Dan York, summarizes recent reports on a security vulnerability in Skype for Mac.

Given that I basically live inside of Skype for Mac and use it extensively every day, this is obviously extremely concerning. Particularly because I do let anyone on Skype send me messages… and my Skype ID is easily found on my websites and many other locations (and since is rather obvious – “danyork”).

As a heavy user of Skype for Mac’s group chat feature, Dan questions why there has been no communications from Skype other than a response to ZDNet UK’s story where they say:

UPDATE (5:13pm): Skype has just sent ZDNet UK a statement promising a fix next week. The statement reads: “We are aware of this and will release a fix early next week to resolve the issue. We take our users privacy very seriously and are working quickly to protect Skype users from this vulnerability.”

This evening Skype has responded in their blog post, Security Vulnerability in Mac Client Has Been Addressed. To summarize:

• Skype acknowledges they were aware of the vulnerability, not only via Pure Hackers but also their own internal processes
• The issue was addressed in a “minor” update, version 5.1.0.922 released on April 14, 2011

This vulnerability … is related to a situation when a malicious contact would send a specifically crafted message that could cause Skype for Mac to crash. Note, this message would have to come from someone already in your Skype Contact List, as Skype’s default privacy settings will not let you receive messages from people that you have not already authorized, hence the term malicious contact.

However, they also stated:

As there were no reports of this vulnerability being exploited in the wild, we did not prompt our users to install this update, as there is another update in the pipeline that will be sent out early next week.

And go on to point out that customers will prompted to install a more comprehensive update to be released next week. But they made the following statement:

In the meantime, we recommend you update your software with the fix made available on April 14th, just click on Skype -> Check for Updates or you can download the software here.

I checked my installed version; it was 5.1.0.914. I did the “Check for Updates” and was told there were “no updates”.

Bottom line: download the updated software here (version 5.1.0.9220 and install it to ensure you have no exposure to this vulnerability. And expect to be notified of a more comprehensive update next week.

You can’t win … when customers are heavily prompted to update, there are complaints; when they are not prompted the story somehow gets out  anyway. Decisions, decisions….

One final question: will this update address any of the issues discussed not only in my recent posts but also in several other online discussions (listed at the end of some of these posts).

Update: Dan questions why this issue even had to come to light in ??Skype’s Security Communication FAIL – Why Issue a HotFix If You Don’t Tell Anyone?

Related articles

• Skype Bug Leaves Mac Users Vulnerable to Exploit (macstories.net)
• Expert: Skype for Mac hole can be used in remote attack (news.cnet.com)
• A bug in Skype for Mac could give hackers root access to OS X (thenextweb.com)
• Skype bug gives attackers root access to Mac OS X (theregister.co.uk)
• Skype vulnerability discovered by Pure Hacking (purehacking.com)

Since its release late Saturday, Skype for iPhone 2.0, with its support of calling over 3G carriers and superwideband audio using Skype’s SILK codec, has set the blogosphere awash with two genres of commentary: those who seem to think the end of free Skype calling is approaching as an Armageddon and those who recognize the launch of Skype for iPhone 2.0 as not only setting a new benchmark for mobile voice calling, especially for call quality, but also having a significant impact on the overall smartphone market.

Re the “small fee” (now set to start at the beginning of 2011), I simply say this is one more sign that Skype is a business with investors who are looking for a return. Nobody can argue about its value-add, both in terms of providing international mobile calling convenience but also by delivering a significantly enhanced user experience through establishing a new benchmark for mobile call quality. This outcome definitely justifies a “small fee”, provided it is not obsessive. Alec Saunders, author of the Voice 2.0 Manifesto, positions this issue appropriately in “Skype’s “small fee” is noise, guys”:

Sometimes you have to really shake your head at the quality of the commentary on the internet.  Fact: Skype has finally released a version of Skype for iPhone that supports calling over 3G networks.  Never mind the fly in the ointment that all the commentary is  stuck on – the fact that Skype wants to charge a “small fee” for you to use it on a 3G network.  Frankly, that’s noise.  People will pay for the ability to make a high quality Skype call on 3G, and not pay their carriers long distance termination charges in foreign markets.  So long as the fee is reasonable, nobody is going to object.

Alec goes on to make several points about what the launch of Skype for iPhone 2.0 really means; his post is well worth the read. (Full disclosure: as Canadians who participate in the Canada Pension Plan, Alec and I each have a $17.50 investment in Skype.)

As for the new benchmark for mobile phone call quality, there are several impacts. But first, if you have not heard it already, click here to hear Skype for iPhone 2.0’s “near CD-quality” call first hand between myself and Dean Elwood in the U.K.

Andy Abramson comments on how deeply Skype developers may have gone into the iPhone hardware to achieve this result in “Skype on 3G-Something Borrowed, Something New”; he concludes with:

How good? Well put it this way..why would anyone with an iPhone want to call over old AT&T after their first Skype over 3G call. Oh, and yes, it makes Skype on Verizon sound like, well, a plain old telephone call…..Ma Bell, you’re back sounding like you’re old self. The way the boys in the labs have always dreamed and said you could.

Over at Voyces.com, in “Skype for iPhone over 3G: An Industry Benchmark Game Changer for Skype”, I have commented on the broader impact of Skype for iPhone’s support of SiLK. Simply put, it has the potential to place Skype as a key mobile communications software infrastructure supplier across the entire mobile phone industry. Not simply because of the technology itself but rather as a result of demonstrating high quality voice calls accessible to Skype’s several million users through a single application for the iPhone resulting in several million end user experience – the “Skype network effect”.

With the support of SILK in a smartphone application that runs over both 3G and WiFi, calling costs become almost secondary to an exceptional end user experience with voice quality on mobile devices.

SILK has now become not only a benchmark but also a key communications infrastructure element. End users will pay for a quality experience, especially when it impacts business productivity. Both wireless carriers and smartphone vendors need to rush to ensure they have incorporated Skype’s SILK technology into their offerings. Otherwise the iPhone (iPad and iPod Touch) have one more key feature that sets them apart from the remainder of the smartphone users.

Dean Elwood sums up this “Skype network effect” best when he talks about the Skype “on-net” calling:

The proposition for Skype’s shareholders is the fact that you have to be on the Skype network in order to get the “near CD-quality”. Because you don’t get hi-def when you call a regular landline or mobile, only another Skype-enabled device. So if you want to make free calls to your friends, they all need to get on the Skype net.

and concludes with…….

It’s the mass-market adoption of Skype that makes it work. You need to be on their network, along with other contacts you call regularly, to make it work for you. So in the absence of interconnect, which Skype do not do, your a. n. other mobile VoIP carrier of the future has to start from the ground up.

Bottom line: Dean backs up his observations by telling me that he will be making most of his voice calls using Skype for iPhone when away from his office. It would be most interesting to see not only if this drives more users to using Skype as opposed to the carriers’ voice channels but also the fallout for the transition of communications from a very hardware-oriented infrastructure to a complete software infrastructure operating totally “in the cloud”.

Next: the questions that remain to be answered going forward.

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• Skype Pushes iPhone 3G Voice Fees Until 2011 (iphonesavior.com)
• Skype 2.0 for iPhone: Is it worth subscribing for 3G VoIP calls? (reviews.cnet.com)
• Skype on the iPhone Goes 3G … Finally (gadgetwise.blogs.nytimes.com)
• Skype on 3G mobile impresses (saunderslog.com)
• Skype on Mobile over 3G: A Skype Video Calling First Experience (voiceontheweb.biz)
• Voice and Chat over iPad: Skype and Truphone Fill the Gap (voiceontheweb.biz)
• Skype for Mobile – Now Focusing a True Skype User Experience (voiceontheweb.biz)
• Skype’s SILK Codec: Working Towards Adoption as a Standard (voiceontheweb.biz)

So it’s finally resolved. The Skype spinout from eBay will involve Skype’s founders as investors and board members while contributing a cash investment. Skype finally owns the core intellectual property required for Skype to operate at its current cost levels. eBay gets the cash they were looking for but 5% less of the new Skype. Canadians still get to invest $16.75 each through the government operated Canada Pension Plan. Marc Andreesen gets involved with another major Internet play. Mike Volpi and Index Ventures are out of the picture. Lawyers and consultants are probably heftily rewarded for all the litigation activity leading to the final resolution. Incessant speculation on Skype Journal’s Skype 5.x Public Chat about how to get around JoltID’s Global Index software will finally cease (well, maybe).

While I have put links to several posts leading up to the resolution below it has been most interesting to read various bloggers comments on the resolution and the future direction for Skype:

Phil Wolff at Skype Journal sums up the numbers in his post, Sold! The Bullets and values the JoltID intellectual property at $275 million. (Phil gets credit for the graphic above, by the way.)

Om picks the winners and losers on My Thoughts on the Skype Settlement: Winners & Losers Scorecard. He points out the “great spin quote” from Silver Lake as a leftover from the “PR spin” days prior to the transparency that comes with social networking. Come on, guys. We’ve all seen the depositions and emails. As for the future, Om comments:

No Silver Lining?: One person who I totally feel for is Silverman, the current CEO of Skype. He gets to run a company which will have the looming presence of its founders.

Whatever the press spin might say, the new investor group is like a poisoned well. It will be a polarized group, always looking over their shoulders. Silverman is going to need to keep a lot of people happy, and those board meetings with nearly two-dozen people aren’t going to be fun, either. But as Biggie Small once said:

“It’s like the more money we come across, the more problems we see.”

Both Kara Swisher at All Things Digital, in All Is Forgiven: “It’s a Clean Slate,” Says Andreessen About Lawsuit-Mad Skype Co-Founders, and Dan Primack at PEHub, in 5 Skype Questions for Marc Andreessen, interviewed Marc Andreeson of Andreeson Horowitz. The common statement about his relationship with Niklas and Janus:

We have not been in business with them before, so we don’t have any baggage at all. Our view is that they’re two super-creative founders. We’ve known lots of legendary founders, and they are all different and have things that make them unique. We include ourselves in that from past experiences. We view ourselves as a pro-founder firm, so we like the idea of founders being involved. It’s a net positive.

Martin Varsavsky. CEO of FON, a company partially financed by many of the same players in the Skype sale, restricts his comments to his thoughts on the future of Skype – where is Skype vulnerable?, where are its strengths? – in Why it may make sense to buy Skype back. His overriding statement:

Skype is simple. Michael Arrington and all of Silicon Valley may find Google Voice amazing but is the average global citizen ready to use it? Massively use it? You download Skype, you find your friends on Skype, you talk. And, if you don’t find them, you Skype out. And when you talk you can also do video. I LOVE video calls on Skype. I used to use them for people I really cared about, relatives, close friends. Now I even do business calls on video with Skype. It just gives you more of a sense of what is going through the other person´s mind. And Skype is the leader on video quality. So simplicity plus video may be a good way to beat flat plans from telcos and avoid being Tivoed. If the video services can migrate to mobile phones Skype is on to something.

Andy Abramson, in The Skype Suit Is Settled-Now Business Can Get On, comments:

I’m just glad the suit is settled between eBay and Skype. Now a lot of things that have been held back can finally move forward. In many ways the settlement is a good thing. The return of the original founders means disruption will continue, and new ideas will flourish. It also means Skype as a business or brand will now have a chance to prove its worth.

Alec Saunders, in eBay’s big mistake; Why the JoltID license was inevitable, concludes:

The lesson in all this? Deals involving technology licenses and acquisitions are common in business. When acquiring a technology asset, buyers must acquire the necessary control needed in order to protect the business.  Either buy, or license in perpetuity, what you need to prosper. Unless your intent is to immediately begin work on a substitute technology, a license for core technology that needs renewal is a sure way to find yourself caught by the short-hairs in a future negotiation.

The bottom line is that Skype is now in a position to focus on building future communications software and services without the distraction of depositions, legal wrangling and media curiosity. Provided he can navigate through a 23-member board with diverse interests and experiences, Josh Silverman can build the real communications software business of providing infrastructure for conversations while having a wealth of technology and business connections available in an advisory role.

Previous Posts:

Om’s trail:

• Skype, Founders Settlement in the Works (Nov. 1)
• Further Details Emerge As Skype & Its Founders Close to Settlement (Nov. 3)
• Skype Founders Fight Their Way Into the New Skype (Nov. 5)
• My Thoughts on the Skype Settlement: Winners & Losers Scorecard (Nov. 6)

Kara Swisher (All Things Digital):

• Volpi and Index Ventures Out of Skype Deal, the Lawsuit-Happy Founder Twins In (Nov. 3 with lots of links to related stories)
• I Love the Smell of Settlement in the Morning: Skype Founders Set to Get 10 Percent, Option to Buy Three Percent More and Two Board Seats (Nov. 3)
• All Is Forgiven: “It’s a Clean Slate,” Says Andreessen About Lawsuit-Mad Skype Co-Founders (Nov. 6)

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• Skype Cofounders Will Be Part Of Buyout Group; Index Ventures Is Out (paidcontent.org)
• Skype Founders Re-Found in Settlement (marketingpilgrim.com)
• Skype founders win back share (guardian.co.uk)
• Andreessen On Skype: “This Is One Of The Most Important Companies On the Internet.” (techcrunch.com)
• eBay’s Skype sale gets go-ahead with settlement (news.cnet.com)
• Confirmed: Skype Founders Settle With eBay And Others, Get 14% Stake In Skype, Not 10% (techcrunch.com)
• Skype Settlement: Zennström And Friis Have Won It Again (paidcontent.org)
• 17 Million Canadians Will Have an Interest in Skype’s Success (voiceontheweb.biz)

Internet Censorship Explorer Nart Villeneuve has been getting lots of questions about his “Breaching Trust” report and issued a Q&A that answers some common questions. Initially he describes how he determined that messages containing key words were being uploaded to a web server. (The technologically curious can get the answer through accessing the link.) He then goes on to say:

Is “normal” Skype affected?

No. The Skype software downloaded from skype.com is not affected by the behavior. The only time “normal” Skype users are affected is when they communicate with TOM-Skype users.

What is TOM-Skype and what is the difference between it and Skype?

If you go to www.skype.com from China, you are redirected to skype.tom.com — so that’s [the] version most Chinese people will use.

In 2004 Skype developed a relationship with TOM Online, a leading wireless provider in China, and announced a joint venture in 2005. Skype and TOM Online produced a special version of the Skype software, known as TOM-Skype, for use in China.

What is Skype saying, have they said anything to you?

I contacted Skype to have the security issue fixed before the report was released. So, they have configured the servers so that one can no longer view the logs and they have deleted sensitive files, such as the one containing the encryption key. Other than that contact, I’ve only seen the statements they’ve made to reporters.

The irony here is that if I find someone using the “F” word inappropriately, at my discretion, they may be deleted from my Facebook friends or Twitter contacts. In one case I reported the use to the person’s parent; that person continues to be a Facebook friend but now posts without the expletives. The paranoid in me could ask “are the Chinese trying to clean up the expression of the English language?”

In closing, I would recall that Skype was involved as an element of the process in getting out to the world the message when some “Free Tibet” demonstrators put a banner up on the Great Wall of China last spring.

Hat tip to Rebecca MacKinnon for pointing to this Q&A. As mentioned in my comment to her post, for the first time in its five year history, we have seen a timely response in a crisis situation directly from the top executive at Skype; hopefully this reflects on the new directions and attitude Skype’s new management team is taking in becoming more transparent with the public. Of course, along with the reported dialogue between Nart and Skype personnel, it means all the technology speculators out there have no opportunity to exercise their minds by delving into the (non)-complexity of how this was detected and corrected. But the blogosphere will survive; other issues will be taken up.

While there has been lots of dismay about the discontinuation of Skypecasts (Skype’s blog posts: here and here), it had appeared for the past several months that the service just did not have the robustness to provide the reliability and quality of service that users would expect. Being a free service, it was obviously placing resource demands with zero revenue potential on Skype developer and support personnel that hopefully can be diverted to bringing feature equality to Skype’s basic service, whether on Windows, Mac or Linux.

There are alternatives; in fact, this decision provides a unique opportunity for two third party conference calling services:

1. Skype Multi-Party Calling:

For up to 25 participants on a call, Skype has recently expanded its multi-party calling capacity. The caveat here is that the host must use a multi-core Windows PC and a reliable broadband internet connection (preferably cable). Participants can be on any version of Skype or be accessed via SkypeOut. In this case the host must set up the call and call out to all the participants. More details here. A unique feature of Skype’s multi-party calling is its ability to show which participant is actually speaking at any given time. But keep in mind Skype really offers multi-party calling, not a full conferencing service.

2. iotum CalliFlower

iotum’s CalliFlower has the benefit of no charge other than whatever it costs to make the connection to one of their access points. I often participate in their daily SquawkBox call via my SkypeOut account; the recent availability of SkypeOut CallerID, displaying my mobile phone number when I make a SkypeOut call, has allowed me to participate in these calls within my SkypeOut subscription without even using the provided password for each call. In fact, there are four options for accessing these calls:

As an example of building communities, iotum has worked with Alan Hunkin to provide a weekly interview session, CalliFlower Communiques, with notable personalities such as William Shatner. Immediate future guests include Ken Blanchard, author of “Being a One Minute Entrepreneur” and actor Alan Alda discussions his recent memoir “Things I Overheard While Talking to Myself.” Recordings of previous sessions are available at the page linked above.

3. HiDef Conferencing

Vapps’ HiDef Conferencing (formerly HiSpeedConferencing) provides high definition (HD) voice quality calls for participants accessing via Skype. Their business grade service involves fixed rate monthly hosting subscriptions involving unlimited Skype access, dial-in to specific numbers in several countries and toll-free numbers. Obviously this involves some ongoing expense to the host but their infrastructure supports providing the best possible voice quality, depending on access mode. The host uses their web controls to set up calls, manage call participants as well as record and archive calls.

Looking at the options it appears the best conference experience comes when:

• hosts are able to setup and fully manage the calls, including an open access invitation;
• users can participate through a web-based experience not only via voice but also via chat.

The good news is that Skype provides either free or low cost unlimited access to any of these services. What will be most interesting is to see if iotum and/or Vapps rise to the opportunity here and and is able to provide encouragement to the many communities that were supported by Skypecasts.

Tags: Skype, Skypecast, iotum, CalliFlower, Hi Def Conferencing, CalliFlower Communique, Vapps, multi-party calling, Alan Hunkin

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Reports of a Skype vulnerability have been addressed by Skype through disabling the Dailymotion video service until the relevant feature has been fixed. This disablement is indicated by the absence of the Dailymotion tab in the “Add Video to Chat” window. For the geek inclined, technical details are here.

With respect to the second issue raised in the article, there is simply one question: “What Skype ads?” There are no ads in the Skype clients (certainly not in mine).

Tags: Skype, Skype vulnerability, Dailymotion

Paul Amery and his Skype Developer Partner team have organized another Skype Developer event to be held in lower Manhattan on Monday, December 10, 4 – 7 p.m.. Hosted by Vapps, Inc., a vendor of hosted conferencing services, this event will involve getting “your thoughts and feedback. The Skype Developer Program is navigating a clear Roadmap for 2008 with a key focus on sustaining our partnerships and our ecosystem while planning for the coming year.”

In attendance, Paul Amery, Director of Skype Developer Program, Antoine Bertout, Partners Relation Manager and several key partners, like our host, Vapps. This is your chance to get behind-the-scenes with some of Skype’s key third party applications and a chance to check out some of the latest Skype partners products, understand the partnership route to market and meet our partners who continue to extend the Skype platform.

Skype Journal will be there to report.

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