Volpi's Skype Business Concept: SIP, social, lite, layoffs

- buy skype, replace p2p with SIP (standard-based, open, can interwork with other VoIP systems – like the Cisco phones)

- use social graph to augment other socials via API or develop its own social

- replace heavy client with flash/html/java version – make it lightweight for embedded devices (mobile)

- clean up staff and cut costs while private

[Links are mine.] Exhibits 1-20 to Declaration of S. Dargitz In Support of PI – PUBLIC, page six, redacted.

Discuss amongst yourselves.

tags: skype, indexventures, skypeforsale, joost, litigation, lawsuit, preliminaryinjunction, injunction, dannyrimer, mikevolpi, volpi

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Doc courtesy of Tara Swisher.

The Sale as described by the Buyers

Their news release of eBay's selling Skype includes the usual hyperbole about the company, investors, management. In the last paragraph:

J.P. Morgan, Barclays and RBC Capital Markets advised Silver Lake and its investor group and have committed to provide the financing necessary to complete the transaction.

Sullivan & Cromwell LLP, Simpson Thacher & Bartlett LLP, Bird & Bird LLP and Michael Silverleaf QC are acting as legal advisors to the investor group.

Goldman Sachs is providing financial advice to eBay on the transaction. Dewey& LeBoeuf LLP is acting as legal advisor to eBay.

While Silver Lake is a lead investor, they are bundling money from other companies, which in turn bundle money from other funds. This is not an exhaustive list of funding sources.

The release:

Investor Group to Acquire Majority Stake in Skype

Tue Sep 1, 2009 9:55am EDT

Transaction values Skype at $2.75 billion

MENLO PARK, Calif., Sept. 1 /PRNewswire/ -- Skype Technologies S.A. and an investor group led by Silver Lake announced today that they have signed a definitive agreement in which the investor group will purchase a 65 percent interest in Skype Technologies from eBay (Nasdaq: EBAY) for approximately $1.9 billion in cash, in a transaction valuing Skype Technologies at $2.75 billion. eBay will retain the remaining 35 percent equity interest in Skype.

Skype Technologies is the manufacturer and developer of Skype software, which is used by millions of individuals and businesses to make free video and voice calls, send instant messages and share files with other Skype users. The software also allows users to make low-cost calls to landlines and mobile telephone lines.

The purchasers are a strong consortium with complementary skill sets. Members of the investor group are Silver Lake, the leader in private investment in technology, technology-enabled and related growth industries; Index Ventures,a premier global venture capital firm; Andreessen Horowitz, a recently launched venture capital firm led by Netscape founder Marc Andreessen and Ben Horowitz; and the Canada Pension Plan Investment Board (CPPIB).

"We are extremely fortunate to have such a talented and seasoned group invest in our company," said Josh Silverman, CEO of Skype. "This is a group of investors and industry veterans that have a strong track record of taking the technology companies they own to the next level. With their know-how helping to guide our vision, Skype is poised to enter the next phase of its growth and development."

"Skype Technologies is an innovative, next-generation technology company that has changed how people and businesses communicate with each other," said Egon Durban, Managing Director at Silver Lake. "This transaction benefits all parties involved and will allow Skype the opportunity to accelerate the growth of its business by harnessing the deep technological and company development expertise that resides within the investor group. Josh Silverman has done a strong job leading the company and we look forward to working with Josh and his team to grow the Skype franchise."

"Skype is one of Europe's greatest startup success stories. In 2004, we recognized its potential as a global telecommunications leader and we've been captivated by the business since we first invested," said Mike Volpi, Index Partner. "eBay has continued to foster Skype's growth as the Internet voice and video communication leader. We are delighted to join this all-star team of professionals and investors in the next chapter of the Skype adventure."

"Skype is the archetypal Internet phenomenon: a breakthrough technology combining with enormously powerful network effects to revolutionize a gigantic industry," said Marc Andreessen, Co-Founder of Andreessen Horowitz. "With this acquisition, we will work with the Skype team and eBay to build the company into a core Internet franchise at huge scale."

"This acquisition represents an opportunity to acquire a leader in the rapidly growing internet telecommunications market and one of the most strategically valuable internet brands in the marketplace. We look forward to working with our partners to help grow Skype in this accelerating industry," said Mark Wiseman, Senior Vice-President, Private Investments with the CPP Investment Board.

"There is no doubt in my mind that the talented players that make up this investment group will enable strong growth of Skype in the years to come,"said John Donahoe, CEO of eBay. "The management team at Skype is one of the most innovative in the industry, and their talent and innovation will be enhanced through this partnership. For eBay, this transaction allows us to unlock both immediate and long-term value while benefiting from talented partners to help Skype accelerate its growth momentum."

Skype Technologies generated revenues of $551 million in 2008, a 44% increase compared to 2007. Registered Skype users reached 405 million by the end of2008, a 47% increase from 2007. eBay has projected Skype Technologies revenues to exceed $1 billion in 2011. Skype Technologies recently introduced a popular Skype iPhone app as well as partnerships with mobile carriers such as Nokia and Hutchison. The company is attracting thousands of new users daily.

J.P. Morgan, Barclays and RBC Capital Markets advised Silver Lake and its investor group and have committed to provide the financing necessary to complete the transaction.

Sullivan & Cromwell LLP, Simpson Thacher & Bartlett LLP, Bird & Bird LLP and Michael Silverleaf QC are acting as legal advisors to the investor group.

Goldman Sachs is providing financial advice to eBay on the transaction. Dewey& LeBoeuf LLP is acting as legal advisor to eBay.

About Skype Technologies

Skype is software that enables the world's conversations. Millions of individuals and businesses use Skype to make free video and voice calls, send instant messages and share files with other Skype users. Everyday, people everywhere also use Skype to make low-cost calls to landlines and mobiles.

About Silver Lake

Silver Lake is the leading investment firm focused on large scale investments in technology, technology-enabled, and related growth industries. SilverLake's mission is to function as a value-added partner to the management teams of the world's leading technology franchises. Its portfolio includes or has included technology industry leaders such as Ameritrade, Avago, Business Objects, Gartner, Instinet, Intelsat, NASDAQ, Sabre / Travelocity, SeagateTechnology, SunGard Data Systems and UGS. For more information, please visit www.silverlake.com.

About Canada Pension Plan Investment Board (CPPIB)

The CPP Investment Board is a professional investment management organization that invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 17 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, the CPP Investment Board invests in public equities, private equities, real estate, inflation-linked bonds, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in London and Hong Kong, the CPP Investment Board is governed and managed independently of the Canada Pension Plan and at arm's length from governments. At June 30, 2009, the CPP Fund totaled C$116.6 billion. For more information about the CPP Investment Board, please visit www.cppib.ca.

About Index Ventures

Index Ventures is a leading global venture capital firm active in technology,biotech and clean tech venture investing since 1996. The firm is dedicated to helping top entrepreneurial teams in the Information Technology and Life Science sectors build their companies into market defining global leaders. The firm has offices in Geneva, London and Jersey and focuses on investments from seed through growth stage companies. Index's growth portfolio includes Adconion, RPX, Betfair and Trialpay. Exits of note include Skype (eBay), MySQL(the world's most popular open source database acquired by Sun), and Last.fm (the world's largest social music platform, recently acquired by CBS). For more information, please visit www.indexventures.com.

About Andreessen Horowitz

Andreessen Horowitz was established in June 2009 by entrepreneurs and engineers Marc Andreessen and Ben Horowitz, based on their vision for a new, modern VC firm designed to support today's entrepreneurs. Andreessen and Horowitz have a track record of investing in, building and scaling highly successful businesses. Andreessen Horowitz is based on Sand Hill Road in Menlo Park, California.

About eBay

Founded in 1995, eBay Inc. (Nasdaq: EBAY) connects hundreds of millions of people around the world every day, empowering them to explore new opportunities and innovate together. eBay does this by providing the Internet platforms of choice for global commerce, payments and communications. Since its inception, eBay has expanded to include some of the strongest brands in the world, including eBay, PayPal, Skype, StubHub, Shopping.com, and others.eBay is headquartered in San Jose, California. For more information, please visit www.eBay.com.

tags: skype, ebay, indexventures, andreessenhorowitz

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Skype CEO: "Today, Skype begins a new chapter"

Josh Silverman welcomes the spinoff in a blog post.

Today, Skype begins a new chapter. We’re spinning off from eBay to become an independent company once again. This is very exciting news for all of us here at Skype, and I want to give all of you a brief overview of what’s happening.

A small group of venture capital funds have agreed with eBay to acquire a majority stake in Skype. The group is led by Silver Lake Partners, joined by Index and Andreessen Horowitz Ventures. You may recognize some names – for example Danny Rimer and Mike Volpi (both at Index Ventures) who were some of the earliest Board members and supporters of Skype.

The new investors will buy approximately 65% of Skype, with eBay continuing to own 35%, in a deal valuing Skype at $2.75 billion US. It means we’re back to being a fully independent company again, but with a new group of owners who believe passionately in our mission and in the ability of our team to deliver on it. I can’t wait.

tags: skype, joshsilverman, silverlake, index, andreessenhorowitz, dannyrimer, mikevolpi

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For Sale By Owner: $2 Billion or Best Offer

It happened. Skype's avalanche of positive cash flow attracted a bid by Skype's founders. But others beat them to it, as last week's rumors as reported by Mike Arrington or The Sunday Times came true.

 

Photo CC BY 2.0 by Casey Serin.

Below: the eBay News Release. Analysis to follow shortly.

September 01, 2009 09:45 AM Eastern Daylight Time  

eBay Inc. Signs Definitive Agreement to Sell Skype in Deal Valuing Communications Business at $2.75 Billion

eBay to Receive Approximately $1.9 Billion in Cash; Retain Approximately 35 Percent Stake

SAN JOSE, Calif.--(BUSINESS WIRE)--eBay Inc. (NASDAQ:EBAY) today announced it has signed a definitive agreement to sell its Skype communications unit in a deal valuing the business at $2.75 billion. The buyer, who will control an approximately 65 percent stake, is an investor group led by Silver Lake and includes Index Ventures, Andreessen Horowitz and the Canada Pension Plan (CPP) Investment Board. eBay is expected to receive approximately $1.9 billion in cash upon the completion of the sale and a note from the buyer in the principal amount of $125 million. The company will retain an approximately 35 percent equity investment in Skype. The transaction, which is not subject to a financing condition, is expected to close in the fourth quarter of 2009.

“This is a great deal, unlocking both immediate and long-term value for eBay and tremendous potential for Skype,” said eBay Inc. President and CEO John Donahoe. “We’ve acted decisively on a deal that delivers a high valuation, gives us significant cash up-front and lets us retain a meaningful minority stake with talented partners. Skype is a strong standalone business, but it does not have synergies with our e-commerce and online payments businesses. As a separate company, we believe that Skype will have the focus required to compete effectively in online voice and video communications and accelerate its growth momentum.”

Commenting on the deal, Egon Durban, managing director at Silver Lake, said: “Skype is an innovative, next-generation company that has changed how people and businesses communicate with each other. This transaction benefits all parties involved and will allow Skype the opportunity to accelerate the growth of its business by harnessing the deep technological and company development expertise that resides within the investor group. Josh Silverman has done a strong job leading the company and we look forward to working with Josh and his team to grow the Skype franchise.”

In April 2009, eBay announced plans to separate Skype from the company, beginning with an IPO in 2010. The decision followed a year-long review of Skype within eBay’s portfolio. As it prepared for an IPO, the company said it would naturally consider bids for Skype that offered an attractive valuation. Donahoe said the deal offered by the investor group achieved that.

“This deal achieves our goal of delivering short- and long-term value to eBay and its stockholders, without the possible delays and market risk of an IPO,” Donahoe said. “Selling Skype now at this great valuation, while retaining an equity stake, makes sense for the company. And it allows us to focus all of our energies on the opportunities in front of PayPal and eBay.”

Acquired by eBay in 2005, Skype has strengthened considerably since early 2008 when Donahoe was named eBay’s CEO and tapped company executive Josh Silverman to lead Skype. Silverman has driven strong momentum while building a new management team and delivering a series of Skype innovations such as software upgrades with dramatically improved video and calling quality, the widely popular Skype iPhone app and mobile partnerships with companies such as Nokia and Hutchison. In 2008, Skype generated revenues of $551 million, a 44 percent increase compared to 2007. Total eBay Inc. revenues for 2008 were $8.5 billion. Registered Skype users reached 405 million by the end of 2008, a 47 percent increase from 2007. Skype is attracting hundreds of thousands of new users each week.

About eBay Inc.

Founded in 1995, eBay Inc. (NASDAQ:EBAY) connects hundreds of millions of people around the world every day, empowering them to explore new opportunities and innovate together. eBay does this by providing the Internet platforms of choice for global commerce, payments and communications. Since its inception, eBay has expanded to include some of the strongest brands in the world, including eBay, PayPal, Skype, StubHub, Shopping.com, and others. eBay is headquartered in San Jose, California. For more information, please visit www.ebay.com.

About Skype

Skype is software that enables the world’s conversations. Millions of individuals and businesses use Skype to make free video and voice calls, send instant messages and share files with other Skype users. Every day, people everywhere also use Skype to make low-cost calls to landlines and mobiles.

About Silver Lake

Silver Lake is the leading investment firm focused on large scale investments in technology, technology-enabled, and related growth industries. Silver Lake's mission is to function as a value-added partner to the management teams of the world's leading technology franchises. Its portfolio includes or has included technology industry leaders such as Ameritrade, Avago, Business Objects, Gartner, Instinet, Intelsat, NASDAQ, Sabre / Travelocity, Seagate Technology, SunGard Data Systems and UGS. For more information, please visit www.silverlake.com.

About Index Ventures

Index Ventures is a leading European venture capital firm active in technology, biotech and clean tech venture investing since 1996. The firm is dedicated to helping top entrepreneurial teams in the Information Technology and Life Science sectors build their companies into market defining global leaders. The firm has offices in Geneva, London and Jersey and focuses on investments from seed through growth stage companies. Index’s portfolio includes Lehigh Technologies Inc., Playfish and Weatherbill and exits of note include MySQL (the world's most popular open source database recently acquired by Sun), Last.fm (the world's largest social music platform, recently acquired by CBS) and BioXell (BIOX, floated on the SWX in 2007). Index Ventures was one of the original venture capital backers and owners of Skype. For more information, please visit www.indexventures.com.

About Andreessen Horowitz

Andreessen Horowitz was established in June 2009 by entrepreneurs and engineers Marc Andreessen and Ben Horowitz, based on their vision for a new, modern VC firm designed to support today’s entrepreneurs. Andreessen and Horowitz have a track record of investing in, building and scaling highly successful businesses. Andreessen Horowitz is based on Sand Hill Road in Menlo Park, California. Mr. Andreessen is a member of eBay’s board of directors.

About Canada Pension Plan (CPP) Investment Board

The CPP Investment Board is a professional investment management organization that invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 17 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, the CPP Investment Board invests in public equities, private equities, real estate, inflation-linked bonds, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in London and Hong Kong, the CPP Investment Board is governed and managed independently of the Canada Pension Plan and at arm's length from governments. At June 30, 2009, the CPP Fund totaled $116.6 billion. For more information about the CPP Investment Board, please visit www.cppib.ca.

Forward Looking Statements

This announcement contains forward-looking statements relating to eBay's future performance that are based on its current expectations, forecasts and assumptions. Those statements involve risks and uncertainties, and actual results may differ materially from those discussed. Factors that could cause or contribute to such differences include, but are not limited to, the receipt and timing of regulatory approval for the transaction; the possibility that the transaction may not close; the reaction of Skype’s users and commercial partners to the transaction; the reaction of competitors to the transaction; the anticipated continuation of Skype’s growth; and the potential longer-term value of Skype.

More information about factors that could affect eBay's operating results can be found in the company's most recent annual report on its Form 10-K and its subsequent quarterly reports on Form 10-Q (available at http://investor.ebay.com). All forward-looking statements are based on information available to eBay on the date hereof, and eBay assumes no obligation to update such statements.

tags: cpp, skype, canada, ebay, ipo, spinout

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Skype To Be Spun Off, Makes Plans for IPO

A huge shock in the Internet telephony world today, as Skype parent company eBay has announced plans to spin Skype off into it's own separate company. Additionally, Skype will be taken public with an Initial Public Offering in 2010.

As their blog states:

"Skype is a great stand-alone business with strong fundamentals and accelerating momentum," said eBay Inc.'s President and CEO, John Donahoe. "But it's clear that Skype has limited synergies with eBay and PayPal. We believe operating Skype as a stand-alone publicly traded company is the best path for maximizing its potential. This will give Skype the focus and resources required to continue its growth and effectively compete in online voice and video communications. In addition, separating Skype will allow eBay to focus entirely on our two core growth engine - e-commerce and online payments - and deliver long-term value to our stockholders."

This is huge news, as rumors have been swirling for the past few weeks surrounding Skype's future. Many thought Skype might be sold off to another firm. Also, there were other rumors that the founders of Skype might try to buy the company back from eBay, after eBay spent $3.1 Billion a few years ago to acquire Skype.

I've never thought eBay would sell off Skype to another entity as the company has reliable profits (around $551 million last year) and is strongly positioned in the VoIP telephony market.

Also, Josh Silverman is an excellent CEO thus far and Skype has a fantastic management team all around.

Skype has had great successes in the last few month, including the introduction of their iPhone application, which had amazing download numbers. The app had been downloaded more than 1 million times within 26 hours of it's debut on the the iTunes store.

I'm anxious to see what's next out of Skype, the granddaddy of VoIP today.

[Official Press Release]

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eBay makes a market in Skype stock

So you've read about eBay making an IPO of some Skype stock in early 2010 after "the founders’ offer fell on deaf ears."

This means:

• The stock market values Skype, instead of bankers or M&A experts. Mark Evans. "Skype has a strong, global brand and a fast-growing business to pull off an IPO. In fact, Skype’s IPO could be red-hot given how it will have strong appeal to retail investors."
• Value When The Market Is Low. The IPO won't be for all of Skype's stock. It could be for as little as ten percent. A 2010h1 IPO will value Skype near the bottom of a (presumed) economic and stock market recovery. So Skype's prices should rise with the market if the IPO is executed properly.
• Bargaining chip? Friis and Zennstrom were clearly trying to preempt a public valuation, getting Skype cheaply. Could an IPO actually help F&Z raise more money to buy Skype before an IPO?
  • Brier Dudley. "I wonder if this will be a milestone, marking the return of tech IPOs. Or could it be a negotiation tactic, to get someone to buy Skype before the offering?"
  • Larry Dignan: "My translation: eBay wants Zennstrom and Friis to raise their price for Skype. And the threat of a Skype IPO is one handy way to get that price up."
  • On the other hand, Alan Marks said for eBay "We're not soliciting bids, we're pursuing an IPO."
• More Liquidity. Post IPO, eBay can sell off the rest of its shares as it sees fit, hopefully appreciated. Meanwhile it can recognize its Skype holdings at more than the post-write-down purchase value.
• Bet on Management. IPOs are a vote of confidence in a company's management. John Furrier: "This again is total validation for the new management at Skype and Josh Silverman. Josh has masterfully led this rapid acceleration of one of the best performing five years old since ‘Sunshine Street’."
• Happy HR. Skype employees will switch to Skype stock instead of eBay stock, improving hiring, retention and motivation.
• Identity. Ownership won't change Skype's operations. It will probably affect their financial reporting, no longer filtered through eBay. 
• No debt to speak of.
• The deal itself: Goldman Sachs may get to sell Skype. No word on which stock exchange will get to IPO Skype. 
• Lots to talk about at the eBay investor call next week.

Other buzz...

Reuters analysts regurgitate useless information.

Andy Abramson is concerned about the company: "But, the issue around JOLT ID needs to be clarified and other questions remain, mostly how in a measured broadband world, Skype keeps playing without any payment to the ISPs, how they deal with the regulators and E911 issues as they look more and more like a telco each day; what their mobile strategy is and more."

Rich Tehrani is excited for VoIP: "It will wipe away the idea that Vonage represents the entire IP communications market."

Alec Saunders is excited for the stock market: "A massive Skype IPO would be just the thing to electrify financial markets, and bring tech stocks back with a roar.  Could Skype have the same impact on financial markets as Netscape with their massive IPO in the 1990’s?  We can only hope."

Larry Dignan is excited for the M&A game: "Now is a good time to take Skype public. It’s growing, it has a critical mass and it could be a fine acquisition target in the future—for a company other than eBay. By plotting an IPO eBay is clearly stating that Skype is worth more. Game on."

tags: ipo, skype, ebay, financials, investment

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Skype sucks up to new FCC chair – like everyone else

The new Matt LeBlanc look-alike is filling a post that affects Skype's future in the US. It's a proper courtesy to greet the new nominee.

SKYPE WELCOMES NOMINATION OF JULIUS GENACHOWSKI AS NEW FCC CHAIRMAN

WASHINGTON, March 3, 2009 – Josh Silverman, Skype’s President, issued the following statement regarding the nomination by President Barack Obama of Julius Genachowski as the new Chairman of the Federal Communications Commission:

"Skype is pleased that President Obama has nominated Julius Genachowski to Chair the Federal Communications Commission. As a trusted member of the Obama technology policy team, we look forward to working with Julius as the FCC establishes policy priorities. The success of the Obama campaign clearly demonstrated that the Internet is a platform for empowering citizens and disrupting existing ways of doing business. Likewise, change is coming to the FCC and we are looking forward to working with Chairman Genachowski to put innovation policy to work for all Americans. We welcome Chairman Genachowski to his new responsibilities and to a future defined by more innovation, faster broadband, and lower phone bills."

The US spends hundreds of billions of dollars annually on telecom, all of it regulated by the Federal Communications Commission. FCC policies affect consumer choice, market consolidation, rural Internet access, the rules of mobile competition, availability of spectrum to citizens.

No wonder figurative bowers of flowers are being heaped upon Chairman Nominee Genachowski from all affected.

Technorati tags: skype, fcc, genachowski, regulation, julius, lobbying

The Skype Restructuring: Global Products, Regional Markets

Josh Silverman joined Skype as President early in the spring of 2008; since then he has been reviewing Skype's opportunities and building a team of experienced executives who can bring to Skype the products, programs and team building expertise required to operate a business with a run rate of $600MM per year, 20% contribution margins to eBay and growing at 380,000 new account registrations per day (with "real user" growth also increasing significantly).

Summarizing the past executive appointment announcements we can clearly start to see the evolution of a business structure, along with each unit's responsibilities:

• Operations: Product, Marketing, Customer Care, Support
• Technology: Engineering, Platform, Development Community
• Strategy: Partnerships, Strategic Alliances, Acquisitions
• Administration: Global Communications Human Resources. Finance, and Legal round out the top executive team.

During our interview at CES 2009 with Skype COO Scott Durschlag, he outlined details of his restructuring of Skype's Operations team along two axes: product and geography under the mantra of providing "Skype Everywhere".

Global product offerings will encompass three divisions: consumer, business and mobile, each responsible for developing products. Each of these groups will be interacting with members of CTO Daniel Berg's technology teams to convert their technology developments into marketable global product offerings and to adapt the technology to meet product marketing needs.

• Consumer will involve the current Skype client desktop offerings along with hardware, such as Skype phones.
• Business starts with the current Skype Business Control Panel but intends to expand well beyond this starting point into a range of offerings, such as Skype for Asterisk and the recently announced IBM LotusLive developments, addressing the small-to-medium business market.
• Mobile involves current products such as Skype for Windows Mobile, Skypephone (in conjunction with iSkoot), the recently launched Skype Lite (including Skype for Android) as well as any upcoming offerings for the iPhone and BlackBerry

In addition each of these divisions will be responsible for developing appropriate customer care and support programs appropriate to market demands. For instance, the business unit will come up with ongoing support programs relevant to supporting sustainable business operations of its products' users. Ideally these programs would follow the model of Red Hat for Linux or Digium for Asterisk and build up a network of resellers and VARS who would provide relevant and timely end user support. While Dan Berg's technology team will be responsible for third party developer partner support, an additional challenge for the Business products group will be to assist with marketing of business applications offered by these developer partners.

While Skype veteran Stefan Oberg is heading up the Business unit, announcements re appointments to head up Consumer and Mobile are pending.

Along the geography axis is a recognition that, while the Products divisions have a global mandate, there are different market needs within different regions of the world. For instance, in many Asian market wireless carriers do not subsidize mobile phones as is the North American practice. This requires a differentiated approach to these markets with respect to how easily innovations, especially around reduced calling costs, can be introduced to these markets.

The geographical market responsibilities are:

• Americas: Don Albert becomes General Manager, Americas. Don has had North America responsibility for a couple of years and will now be responsible for both North and South America. With respect to the latter he is looking forward to building on all the Skype activity in Brazil, for instance. (And, yes, once again at CES Don was made aware we are awaiting SkypeIn and a Skype Store for Canada)
• Europe, Middle East, Africa (EMEA): appointment pending
• Asia/Pacific: Yesterday we saw an announcement of the appointment of Dan Neary as General Manager, Skype Asia Pacific. One of Dan's initial responsibilities will be to build and monitor closer relationships with partners such as TOMSkype to avoid embarrassments such as that created by the TOM Skype privacy breach we have reported on last fall.

Outstanding executive appointments are expected shortly; at this point it's becoming all about execution. The next six months will tell the story.

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The Skype - Oprah Feedback Loop - It Works in Strange Ways

This afternoon I came across this article by reporter Chris O'Brien in today's San Jose Mercury News: "Video Chat has entered the mainstream". It appears that the worlds of Oprah viewers and Silicon Valley geeks and reporters have more than six degrees of separation. The story starts out by talking about an email he received from his mother:

Seemingly out of nowhere, this note from her landed in my inbox: "Have you heard of Skype? Apparently you can use it to do free video calls on the computer."

My mother, who lives just outside Kansas City, tends to be a reliable barometer for when a technology is gaining adoption outside the hermetically sealed bubble that is Silicon Valley. Well, my mom, and Oprah. As one of only a handful of people on the planet who don't watch Oprah's show every day, I had missed the fact that she's recently begun using Skype to make regular video calls with her audience.

Chris goes on to report on a brief interview with Skype President Josh Silverman whom he quotes with:

And Skype has a new version in beta that will make video calling much more central to the service, according to Skype President Josh Silverman.

.... And in its new release, Skype users will be able to enlarge the video to fill the entire screen without degrading the picture quality.

Well we now know what Chris is giving his mother for Christmas. For his benefit, listed below are previous Skype Journal posts on both Skype High Quality Video and our reporting last March on Oprah's use of Skype Video.

• Skype Sponsors Oprah's "A New Earth" Web Event
• Three Big Milestones in Skype's Fifth Year
• High Quality Video: What's the Benchmark?
• High Quality Video: Definitely a Winner for Skype
• Expanding the High Quality Video Experience and Observations
• To Be Restored: Camera Flexibility for Video Hackers
• Installing a Logitech High Quality Video Camera: The Experience.

Chris, keep up with Skype Journal and you won't be learning about how Skype is used from your mother.

By the way, how did I know to follow up on Chris's interview with Skype President Josh Silverman last Wednesday? He set it up via Twitter messages with Skype PR. They had found that Twitter provided the most "immediate" asynchronous communications mode as compared to, say, email exchanges. Also speaks for the device independence of Twitter.

A final question: will we be seeing a new version of Skype High Quality Video (or better) introduced at CES in January?

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Skype's Restructuring Makes Major Moves: New CxO Announcements

Over the past few months, announcements have been few and far between with respect to Skype product news. But at the same time I have often discussed Skype's restructuring moves; the first official disclosure of a restructuring was disclosed in our September interview with Skype's new President Josh Silverman. Well it appears that Josh has been busy doing interviews; today three top level appointments were announced:

Daniel Berg, previously Sun's London-based Chief Technology Officer for Global Sales and Services as well as Vice-President of Systems Engineering for EMEA, has been appointed as Skype's Chief Technology Officer, starting January 2, 2009. In a summary statement from Skype's blog post:

As CTO, Daniel Berg’s primary responsibility will be to drive innovation and ensure Skype continues to develop great software. With a mandate covering Skype’s full range of products, he will develop and maintain a global team of more than 300 staff.

Daniel has authored several books. But since he has not made any statements on his appointment yet, we could paraphrase a statement he made about his Sun activities last April in a post entitled "Travel, Talk, Repeat" on Sun's "Contrarion Minds" blog:

So he travels. A lot.

"I actually spend 25 percent of my working day, on average, in the air," says Berg, who is based in the U.K. "That's not going to the airport, not coming home from airport, that's in the air."

He knows this because he sticks to a time budget.

"I know I need to be spending this much time with customers and this much with organizational matters and this much with employee development, to make sure I'm staying focused and balanced," he explains.

His biggest challenge?

"Articulating the value Sun [Skype] has," Berg replies. "I know this has been said before, but I've been at Sun 15 years and this is the best lineup of technology, products, and offerings we've ever had. Yet when I go talk to customers, one of the first things they say is, 'Oh, I didn't know you guys did that.'"

So we'll be expecting Dan to become one of the more "public" faces of Skype. And that those air miles will keep on building up.

The second appointment is Christopher S. Dean as Chief Strategy Officer. From his LinkedIn profile, Christopher has a long history of working with startups, including periods on the venture capital side in Silicon Valley, most recently as co-founder of Texada Capital. At one point he and Skype's GM Audio and Video Jonathan Christensen were colleagues in a San Francisco-based venture capital firm called Sweetwater Partners, whose Internet traces seem to have disappeared. From the Skype blog post announcement:

Christopher S. Dean will focus on Skype’s strategy, including the development of partnerships and strategic alliances with other like-minded organisations and the acquisition of companies and technologies for Skype. His team will act as the incubator and strategic planning hub for new ideas and projects which support Skype’s technology vision and long term corporate goals.

It appears that Christopher will be based out of Skype's San Jose office; his responsibilities will be a key to driving Skype from a $500MM per year revenue business into the the multi-billion dollar revenues needed to justify eBay's initial investment in Skype. Why the "S."? I assume that Christopher is trying to avoid confusion with the U.K.'s Olympic Ice Dancing multiple Medallist Christopher Dean.

The final appointment, another key to ensuring Skype hires and maintains appropriately skilled and motivated employees, is the appointment of Anne Gillespie, whose long history of EMEA positions with Compaq and HP, brings the experience required to serve as head of Skype Human Resources.

There's still one more major executive move I am expecting - a Chief Marketing Officer who bring the badly needed messaging and market communications strategies and disciplines required for a business that's expected to attract sufficient usage to generate those multi-billion dollar sales.

And I'm sure Lee Dryburgh has no problem with my publicly inviting Dan and Christopher to register to join the rest of the Emerging Communications community at eComm 2009; after all Skype is a Platinum sponsor.

Best wishes for success, Dan, Christopher and Anne from Skype Journal.

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Motley Fool Discusses The 2012 Annual Report of SkypePal Inc.

The Motley Fool has become a popular and widely respected investment community site since the origins of the commercial Internet in the mid-90's with the objective of helping people take control of their financial lives. It has evolved into a multi-media financial services operation; they have free and premium services; suggest portfolios and try to pick recommendations, host discussion forums amongst other activities. "The company's name was taken from Shakespeare, whose wise fools both instructed, amused, and could speak the truth to the king -- without getting their head cut off."

In a post yesterday about "5 Free Internet Winners" they discuss the five biggest winners if free WiFi comes to pass as a result of anticipated rules for forthcoming spectrum auctions in the U.S. Google, Logitech, Amazon, Nintendo and "eBay | SkypePal" are the selections. Why SkypePal?

Forget eBay.com itself. By the time free access hits the masses, PayPal and perhaps even Skype will be bigger parts of this portfolio of verbs. Heck, even the name eBay may be toast as you crack open the 2012 annual report of SkypePal Incorporated.

Skype and PayPal will be the biggest winners of blanketed coverage. Skype remains the global voice chat leader with 370 million users worldwide. If you don't think that Skype will replace a few landline telephone accounts once connectivity is pervasive, you may as well Skype me to tell me otherwise.

PayPal is already the leader in micro-payments. It will become an even bigger force in real world transactions under Martin's scenario of access for all.

Certainly an opinion contary to all those thinking that eBay is about to run out and sell Skype. And it reinforces my long held opinion that the new executive team has one primary goal - to drive up the value of Skype to the point where eBay can not only fully recover its over $3B total acquisition cost of Skype but also provide a reasonable return, whether as an ongoing operation or through an exit involving a sale or IPO. Motley Fool goes further and feels that Skype will become one of the primary value drivers of eBay shares going forward, given that eBay's online operation is struggling to find new ways to grow.

As for more reliable indicators of Skype's current growth than Skype's published number of accounts (not subscribers, not users), check out the peak number of users daily shown in the Skype client, Jean Mercier's note on the tripling of Skype downloads and Hudson Barton's "Real" User tracking showing that Skype is has returned to a growth rate comparable to its 2006 rate.

But in the background the new executive team has been working on the restructuring discussed in Skype Journal's interview with Skype President Josh Silverman. In a recent "Home Improvement" post, Josh gave an update on the the efforts required to "right the ship":

Excited as we are about bringing new colleagues aboard, there’s more to reorganizing our structure for continued growth. Back in the summer, we set out to be smart about it. And transparent. And fair.

Which is why we held numerous workshops to gain input from the team on how our structure and ways of working need to change. Change that we hope will lead to sustained growth, better products and an even more empowering work life at Skype. One of the things we’re doing is to create smaller “companies” within the company: consumer-, business-, mobility-, and developer-focused business units vaccinated against shackles that curb innovation and risk-taking. Each new business unit is designed to emulate the feel of a start-up and to cultivate a deeper sense of ownership.

This is just a low-resolution snapshot from what’s a continual journey of change. There’s much more to it, of course. Replotting our roles, responsibilities and accountability takes time. While we think that we’ve done most things right, some won’t come through as intended. Tweaking them for a few months should make life at Skype work well for everybody.

And he concludes with:

Our structural rethink isn’t about change for change’s sake. From day one, everything at Skype has boiled down to delighting the customer. With a bit of home improvement to support further growth and innovation, we’re just making sure it stays that way.

At least Motley Fool and the Skype executive team are in sync with respect to the primary goal at Skype. The next few months and the subtle indications of forthcoming new product and service announcements will tell if the foundation is being built to achieve these goals. From restructuring will now come the challenge of execution.

Tags: Motley Fool, eBay, Skype, PayPal, Josh Silverman

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Skype Becomes Platinum Sponsor for eComm 2009

Perhaps the most informative event I have attended during my two-and-a-half years of writing for Skype Journal was last spring's eComm 2008. Our of a sense of frustration organizer Lee Dryburgh took it upon himself to risk organizing this event when the former eTel Conference announced it would be no more. The 300 attendees were treated to a buffet of information about various initiatives being undertaken to deploy IP-based communications in innovative ways. From communications enhanced business processes to a garage-based operation to monitor security of abandoned farm houses, we all learned a lot. And the networking opportunity was excellent.

eComm 2009 has been announced; in fact, a call for speakers flooded Lee's email over the past few weeks. He has put together a tentative schedule and been recruiting sponsors. Last year's sponsors included many vendors we have written about since the event including iSkoot (Skypephone), Voxbone (iNum), VAPPS (HiDef Conferencing) and Brough Turner's NMS Communications. Sponsors recruited to date for eComm 2009 include, once again Voxbone, and newcomers Global IP Solutions and Voxeo.

Today we learned that Skype has added its name to the list of sponsors. This is a new initiative for Skype in that they have previously tended to maybe provide speakers but not sponsorship at this type of event. In a statement to Lee Dryburgh this evening, Skype's GM Audio and Video (and a keynote speaker last year) Jonathan Christensen said:

... thinking about why we did it.. We believe that communications is going through a major shift from hardware devices on dedicated networks to software applications. A new paradigm is emerging. As a clear leader in this new age of communications, it makes sense for Skype to sponsor the eComm event as it is all about celebrating this innovation and sharing our vision for the future of communications with those individuals and companies who are most interested in changing the way people around the world communicate.

It's been pretty quiet recently on the Skype scene. But then President Josh Silverman did tell us in our September interview that Skype was undergoing a major restructuring. And we have not heard of any layoffs. So it would only be natural to assume that development efforts (beyond the Skype for Windows 4.0 beta program) are under way and we can assume we'll see new product and service announcements in 2009.

Would any be made at eComm 2009? Speakers from Skype include Jonathan Christensen and Director of Strategy Julien Decot.

Registration for attendees opens December 2, 2008.

Note: Skype Journal editor Phil Wolff, Skype's Jonathan Christensen, Voxeo's Dan York, Brough Turner and Jon Arnold are on the eComm 2009 Advisory Board.

Tags: eComm2009, Skype, Jonathan Christensen, Lee Dryburgh, Julien Decot, Voxbone, GIPS, Voxeo

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Skype Seeking Skype Developer Community Manager

If we go back to our early September interview with Josh Silverman where we discussed "The Way Ahead - Platforms and Partners", Josh stated in response to our question about addressing ongoing partner communications issues:

What I don't want to do is over promise. Step one is, when you get somebody good in, lay out a plan and then when we're ready to announce some more forward looking things we'll do that.

I take the partner program really seriously and we're aware that we've not invested adequately behind it and want to do more. The first thing we are going to do is hire an experienced, capable leader of that organization who will pull together for me a plan for what resources do we need to invest in -- engineering, partner support, evangelism, technical documentation -- to make sure we build an organization that can support our partners robustly.

Skype is about to take "Step one" and has put up a job posting for a "Manager, Skype Developer Community".

Interested in an extraordinary opportunity to win the hearts and minds of developers all over the world? Are you passionate about the promise of rich Internet communications? If so, Skype needs you to come help change the industry. We are seeking an individual who can help provide knowledge, expertise, and charisma for partners building applications on the Skype Platform.

A comment about the Skype platform:

The Skype Platform provides developers with an open communications development environment with unparalleled richness and reach. With the Skype platform developers can build and deploy differentiated and revenue-generating communications applications, devices, and services for businesses and consumers alike. Since its launch 5 years ago, Skype has grown to over 330 [370] Million registered users across the globe. Skype provides a breadth of rich and integrated communications experiences. Now we are looking for developers to take those capabilities and experiences to another level by integrating Skype into applications, devices, and services on the web. If you are interested in voice over IP, mobile devices, audio coding, video services, rich collaboration, gaming, next generation internet / interactive TV, Location based services and experience as a leader within a community of developers... this is the role for you.

And the challenge:

Your challenge is to drive the Skype Community program that moves the new platform forward, compliments our platform product investments and ultimately delights our partner community and users. Your success will be measured by your ability to work closely with the product teams to develop a comprehensive developer marketing plan, and work with our marketing, product, and business development teams to evangelize Skype's tools, development environment, and unique value proposition to the development community.

You will be part of the newly formed Skype Platform team whose mission is to lead the adoption of Skype's Platform with developers and ISVs. The team is resourced and chartered to secure the future of the Skype Platform with developer audiences that span corporate and commercial developers, device developers, next generation developers in startups, students and social developers that writes plug-ins, widgets and mash-up applications today.

It's a senior management position with responsibilities for leading a renewed Skype Developer program - articulating the vision, analyzing the market space and established best practices, executing on building sustainable developer partnerships, driving the interface between internal Skype resource teams such as developers, business development, marketing and the external developer partners through various outreach activities.

After describing the skills and experience sought, the posting concludes with:

You will be responsible for managing a team of professionals that will support your programs and plans to create a significant and long lasting impact on the community of Skype Software developers. We are looking for a thought leader that can also motivate and raise the enthusiasm of all Skype developers. This is a position with lots of visibility outside of Skype and experience managing media and driving public events is critical.

Location: London, UK or San Jose, CA. (With lots of air miles guaranteed.)

As for Dan York's question about "the team is resourced and chartered", recall that earlier in the same early September interview, Josh mentioned:

Right now we have created the job of GM of Platform; I hope to very soon name a GM of Platform. That person is going to have to really work on what does the architecture need to look like to support this, what are the API's going to be - reference UI's, technical documentation - as well as evangelizing to the broader community forming some of our partnerships, so we have some work to do.

So, I have to ask, in the context of what we heard during the interview: Has Skype appointed the GM of Platform but not announced it yet?

Dan also comments:

For those of us watching the emerging communication/telephony space, we've seen Skype make several different attempts over the years to create a successful developer program. Given their incredible user base and platform, it's been curious to see that they haven't yet found the right formula.

The Developer Program has more or less stalled since my Primer series post last fall discussing the developer partner achievements to that point in time. Yet there remain some basic resources such as API's, a base of about 50 partner applications, and what continues to be world leading technology that gives Skype a head start in architecting and building a complete platform from which developer partners can build successful businesses.

In the meantime we have seen the evolution of the Apple Developer Program for the iPhone where, even with my bias towards the BlackBerry, I have to admit that we have seen some very interesting, innovative and impressive third party applications and mashups. They link voice, presence, location-based services, social networking, search. The results include obtaining real time information for traffic and transit, contributing to a successful US presidential political campaign and finding the nearest Tim Hortons or Starbucks. The most interesting has to be this week's launch of voice activated Google Search, often invoking location based information for assistance.

The overriding challenge for Skype's Developer Community Manager will be to create a winning environment that can foster a similar level of creativity and innovation while generating business wins for both Skype and the developer partners. Or to requote Josh's statement: "to make sure we build an organization that can support our partners robustly."

From my viewpoint, it's the position that will ultimately make or break the restructured Skype. Partner innovation and successful business development are key to the sustainable and increasing revenues required to justify eBay's investment in Skype.

Hat tip to Dan York who first pointed this out in a Twitter tweet.

Tags: Skype, Developer, Skype Extras, Josh Silverman, iPhone, Dan York, Skype Partner Program

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Over at GigaOm: BlackBerry Storm Should Be Called BlackBerry Stealth

This morning a post on my observations of BlackBerry's role in the smartphone wars were published in a post entitled: Why BlackBerry Storm Is An iPhone (and G-1) Killer.

It's a classic case of the importance of working with customers who have large customer or user bases such that this asset alone may trump all the technology arguments out there.RIM designed the Storm to meet Verizon's and Vodafone's requirements. It's the embedded user base that will be a most significant factor in determining the extent of market penetration.

Full disclosure: I have both an iPhone and a BlackBerry Bold. Each has its niche of applications and target markets. iPhone finds me the closest Tim Horton's or Starbucks. Bold is still my multi-processing smartphone of choice for business applications; its precision trackball pointing device allowed me to transcribe the Josh Silverman interview - an application I could not do with the iPhone. And Bold provides Skype Chat messages in real time in background when using iSkoot.

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Josh Silverman at the Absolut Ice Bar

A few video questions with Skype CEO Silverman at Skype's fifth birthday party.

tags: skype, london, uk, absolut, party

Follow Phil Wolff on Twitter or FriendFeed or on Skype.
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Blackberry Bold: Challenged to Deliver on Its Full Potential

Over the past five weeks I have had the opportunity to work with the Blackberry Bold on the Rogers network, including a week in California where I used it on AT&T's network. While it has provided significant performance improvements over my previous 8820 and has several applications that just are not available for the iPhone, I still had the feeling I was running with late beta stage or release candidate firmware. The availability of a new firmware release over the past weekend has changed that feeling. But its U.S. release on AT&T has also been dogged by 3G network robustness issues.
Let me put some of these issues in perspective, incorporating my own experience with the Bold on both networks.
There are two major technical issues related to the Bold:

• Network robustness issues at AT&T
• Firmware issues that have possibly resulted in suspension of deliveries at Orange (and reports of inventory shortages at other carriers)

First, to cover the AT&T network robustness issues:

• as reported in RIM's second-quarter report, 60 carriers in 29 countries have launched the Bold, including Canada where I've had a Bold running on Rogers for the past five weeks.
  
• several recent news reports have reported on network robustness issues as a contributor to the delayed launch on AT&T: Globe and Mail, TMCNet, CrunchGear
• a personal indicator: on a recent trip to California both my Blackberry Bold and iPhone 3G found an "EDGE" signal on AT&T more often than it found a 3G signal (in spite of setting the Bold to only operate on 3G). On the Rogers network I find the "3G" signal (in supported urban areas, such as Toronto and Montreal) more than 95 percent of the time.

I have to conclude, combining these issues, that the AT&T network robustness issues are real and serve as a threat to RIM's ability to penetrate the U.S. market via the Bold. On the other hand the pending launch of Blackberry Storm at Verizon may become RIM's primary route to to the U.S. market for their 3G smartphones, given Verizon's reputation for, and experience with, 3G networks along with their extensive customer base. (Why else would several of my U.S.-based blogging colleagues attending the recent IT Expo all be running their laptops on Verizon for Internet connectivity with no complaints?)
Five weeks' experience with the Bold tells me about its firmware:

• It delivers a significant performance improvement relative to the Blackberry 8820 I have been using for the past year. An half-VGA display with over 200 dpi resolution, 3G network speed and 624 Mhz processor speed all contribute.
• At no time has my experience to date inhibited my ability to carry on my normal mobile-supported business activities. I have had an opportunity to successfully take advantage of new applications such as editing Word documents.
• The display grows on you; when you find crystal clear small fonts or view Google Maps, you get this "how did they do this?" feeling. As indicated in other reviews, it's stunning. And the supported resolution is a major contributor to my next point.
• The Bold is definitely a game changer. After my week of traveling to California with the Bold, I realized that I was experiencing a significant change in my mobile device work patterns. I was simply going to the Bold to keep current not only on email (using a strategic combination of both Blackberry Mail and GMail) but also on my Twitter feed, Facebook and Google Reader. I was able to not only read but also edit Word documents. I had lost the anxiety-inflamed urge to fire up my laptop PC to remain "always connected"; One non-technical acquaintance who has had a Bold since the Rogers launch in late August commented to me last weekend "I'm beginning to think my Bold is more powerful than my notebook".
• At Mobilize 08 I met Google Maps senior product manager Steve Lee who pointed me to a new version of Google Maps for Blackberry which added Street View to the feature set available on Blackberry. While Google Maps itself is an excellent demonstration of both the Bold's display quality and speed, turning on Street View and either moving down a street or rotating around a selected address brings into play both network and processor speeds to dynamically generate high quality images. (While this is a feature that will be included on Android, it is still not available on the iPhone.)
• Using Blackberry's MediaSync, I can keep my music files updated by syncing with iTunes. But I also found having the trackball mouse a significant benefit when transcribing our interview with Josh Silverman via the media player; basically I was using the Bold as a Dictaphone.
• Skype chats running in iSkoot can run in background and provide notification when new chat messages appear. Also when my home office broadband was down recently for a neighborhood cable upgrade, I was able to use iSkoot to call into the daily SquawkBox conference call.
• Performance on WiFi has been excellent; walk into a registered WiFi zone and the Bold picks it up immediately. The actual registration process itself for a WiFi zone could be smoother but otherwise it works as expected.
• However, the Bold has been by no means perfect. Web pages would sometimes come up slowly; on some sites I would randomly get either the actual PC version of a page or the mobile version of the site. Sites were often stripped down to their basic content, absent of banners and sidebars. YouTube videos would stall with a "buffering" indicator appearing in the display; I was never able to view the complete video. I started to feel this was late beta stage firmware, not quite ready for "Main Street". And then Friday reports appeared that Orange was possibly suspending Blackberry shipments due to software quality issues.

Friday evening I learned that RIM had released new firmware for Blackberry Bold on Rogers. It was described as addressing browser issues, delivering more stability and improving memory management, amongst other issues. I installed it quite seamlessly Saturday morning with the following immediate observations:

• The browser is much faster at bringing up standard web pages and renders original web pages correctly. Pages with few "feature enhancements" involving "scripts" load as rapidly as on the iPhone; pages with lots of "scripts" do take longer but are correctly and much more rapidly rendered.
• YouTube videos can now be played to the end. On some videos I encounter a momentary "buffering" delay but they always went to completion. The actual player itself could provide better video quality to achieve the superb quality I have seen on the Bold's display when mpeg movie files are run but a user can readily follow the YouTube video action.
• After two days' use, using the phone itself only minimally but with lots of web activity over WiFi, my battery is only down to the 40% level whereas with the earlier version I found I had to always do a daily overnight recharge.

Other issues need a few days' use to determine if they have been addressed. But overall this upgraded Bold firmware appears to spell good news for not only Blackberry Bold but also the Blackberry Storm whose major differences involve radio bands supported, slightly larger display resolution and the type of keyboard but otherwise are based on the same underlying operating system, application and browser firmware.
The question that remains here is whether AT&T can fix their network problems in the near future or will the pending launch of Blackberry Storm become the real Blackberry 3G device launch product? For once I am quite happy to be a Rogers customer where they have spent over a year working with 3G technology prior to the Bold's launch and the network performance is "just there".
Bottom line: the Bold allows new user work patterns for mobile smartphones. It significantly reduces or removes the reliance on laptops to keep current with many communications activities, whether Skype Chat, Twitter Feeds or even minor document modification. Its 480 x 320 display makes it easy to read blog posts without ribbon bars. Background processing allows true multi-tasking. If you're in a country where it is available it is worth checking out (especially once any residual firmware issues are resolved; if you're in the U.S., it's worth having the patience to await its release on AT&T or even the Storm's release on Verizon.
Disclosure: the author has held a minuscule number of RIM shares since 1998.

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The Story Behind the Story: How a Canadian cracked the Great Firewall of China

As a four time graduate of the University of Toronto, I am glad to see the atmosphere for investigative research is thriving at my alma mater. A researcher at their unique Citizen Lab, "focusing on advanced research and development at the intersection of digital media and world civic politics", is responsible for uncovering the TOM-Skype security breach that has had widespread coverage.
Globe and Mail reporter Matt Hartley has obviously gone to the lab for an interview with researcher Nart Villeneuve for his article in today's editions: How a Canadian cracked the Great Firewall of China. .... the irony of where "lost passwords" can lead you:

When he couldn't remember the password to his Chinese MySpace account he decided to take a look at Skype.
...Using a TOM-Skype account on one computer and a regular Skype account on a nearby laptop, Mr. Villeneuve would type a word into one computer and see if the other computer received the message, to see what information would be filtered out by the service's censorship tools. When he typed in a common four-letter expletive and hit send, it didn't show up on the other computer. But he noticed something else.

Read on. Further along Matt reports:

After he contacted Skype on Wednesday to inform them of the breach, the company moved quickly to plug the holes in the TOM-Skype servers, Mr. Villeneuve said.

And, as Phil has already reported, Skype President Josh Silverman responds here, including this comment:

It's important to remind everybody that the issues highlighted in yesterday's Information Warfare Monitor / ONI Asia report refer only to communications in which one or more parties are using TOM software to conduct instant messaging. It does not affect communications where all parties are using standard Skype software. Skype-to-Skype communications are, and always have been, completely secure and private.

New York Times, Oct. 2 (registration required)
Wall Street Journal (may encounter a walled garden), noting that TOM-Skype has 69 million users, places this story in the perspective of other "Doing business in China" stories involving Microsoft, Google and Yahoo.

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Skype President Addresses Chinese Privacy Breach

Read Josh Silverman's announcement.

Skype Journal Interviews Josh Silverman: The Way Ahead - Markets

This is the fifth in a series of posts resulting from an interview a week ago Friday with Josh Silverman, Skype's recently appointed President. In this post we talk about addressing the small-to-medium business market as well as various geographical markets.
Over its five years, Skype has built up, almost totally virally, a significant base of users who take advantage of Skype to not only reduce their business communications costs but also to communicate more effectively with colleagues and customers around the world. At the same time various Skype software partners have built offerings, such as Pamela, PamFax and Skylook, that either focus on Skype as a business communications tool or include Skype amongst their options for calling. Within Skype's own offerings, the Business Control Panel provides the tools for a system administrator to handle both the deployment of Skype and the administration of Skype accounts within a business's operations.
OnState is a primary example of the latter. They have built up a call center offering that takes full advantage of both instant messaging chat and voice in dealing with both inbound and outbound calls; they also take advantage of the three founders' combined over sixty years' experience participating in the call center market. Yet, they encountered many opportunities where they had to go back to Skype for assistance since, for one reason or another, Skype's program were insufficient to address business users' requirement. The result is that today OnState offers their customers "one stop shopping" whereby, on acquiring a customer, OnState takes on responsibility for addressing Skype subscription needs, hardware requirements (headsets and handsets, implementation issues and first level technical support.
The Business Control Panel has had its limitations also; the main fear has been to mitigate potential for fraudulent or unauthorized activity through transaction value and volume licensing limits.
As for geographical markets, Skype met a much larger need for communications cost reductions in Europe and Asia than in North America. As a result over 80% of Skype's revenues continue to come from outside the U.S. The two primary needs met in North America are for "Friends and Family" calling outside North America and small businesses who are working to grow internationally - both internally and with their suppliers and customers.
In growing internationally, there has been the challenge of building user bases in widely diverse markets; "free", "easy-to-install" and a whole lot of viral marketing action have introduced significant adoption around the world. But this success has led to more business-oriented challenges in working out termination agreements, establishing effective multi-currency transaction systems (although being an eBay co-unit of PayPal certainly helps), multiple language versions of software (27 at last count) and providing multi-lingual, internationally available technical support. (We'll talk about marketing and more about technical support in future posts in this series.)
We asked Josh about the Skype's approach to the business market:

JS: Skype in the business market. There's more that needs to be done. (you guys are smart, you're asking all the right questions). Platform is a huge opportunity for us; business is another big opportunity for us. About half of the communications market is business; we have a great solution, especially for small-to-medium size businesses. We haven't tailored that solution to businesses very much; we haven't communicated to businesses that we have that solution. In the new organizational design one of the pieces of that will be to build out a business unit focused on small-to-medium size businesses where we'll have some resources available to tailor our product and some sales and marketing resources to work ... I don't think that we'll be directly selling to small-to-medium size businesses but we can work with VAR's to help support them in bringing Skype to businesses.

(Note this interview occurred two weeks prior to last week's announcement of Skype for Asterisk, a program that leverages Digium's Asterisk reseller channel for sales, implementation and ongoing support requirements.)
We then moved on to ask about various geographical markets:
SJ: North America. (Thank God for Oprah!) Skype has become much more a household name this past year (with an acknowledgement to Don Albert, GM North America). What does it take to keep that business going forward in U.S. and Canada and what are the strategies for U.S. and Canada?

JS: We're very aware that the number one way to grow Skype is to build products the users love. That is our first mandate always. Once you have a product users love, we can accelerate it by some smart marketing programs. (By the way if you don't have a product that users love no amount of marketing on earth will save you, right?) So we do have a product that users love and I don't think we have done as much as we could to communicate that.
Oprah is a great example. It is not our intention and people should not expect massive multi-million dollar marketing budgets from Skype. But there are some smart tactical things we can do working together with evangelists like Oprah to build awareness. It's our belief that once you've grown awareness, people will try it; once they try it they'll love it. and the rest takes care of itself. At the Democratic national convention we were quite happy to see many of the national broadcasters using Skype as a way to expand their coverage and you should be looking for more programs like that in the United States in the year to come.

SJ: China is your biggest market?

JS: In terms of total users it's one of our top markets; the answer is yes.

SJ: QQ is still kicking butt in China? What strategy do you have in your existing partnership with Tom?

JS: We have a great partnership with Tom who knows the local market very well. Tom is also a very entrepreneurial, innovative, fast moving company. We're very pleased to be partnering with them; they're the right partner to continue building our presence in China.

SJ: Do you have your own people in Asia?

JS: A couple of people in Asia who work with our partners to make sure they're getting the support they need and also giving us real feedback from the market on what we need to be doing on [our] core platform to be able to support Asia better.

SJ: How about India?

JS: We don't have anyone working in India. We don't have a partnership in India to announce but we are seeing good growth in India but we think it's a terrific market and we are expecting to have more focus on that in 2009
My observation, five months in, [is that] markets where Skype has the most power are markets where you have high broadband connectivity, you have a large ex-pat population, and where the local telephony system is not as efficient as it could be. Many of the developing markets meet that profile so we think we have a huge opportunity in developing markets such as India and it's our intention to focus more on that in the coming year.

SJ: To succeed in the mobile market place, mobile device manufacturers have had to build carrier relationships. What does Skype need to do with either handset manufacturers and/ or carriers to succeed in the mobile market?

JS: I don't think the carriers should be able to dictate what software the users get to use. any company, the smallest startup in the world, if it has really outstanding software ought to be able to take on the whole world and not have to hire 50 people to develop relationships with 300 carriers.