23 million Skype users log in at the same time

Skype hit a new high watermark for user activity today: 23 million people logged in to the Skype network at the same time.

Skype should reach 26 million concurrent by the end of the year, barring any major improvements in distribution or marketing.

Dialtone is the most useful measure we have of Skype's capacity. The more people who use Skype, the more valuable Skype is to all the users. Skype's capacity for network effect is driven by the number of people with accounts times the percent of the day they are available for incoming calls.

tags: skype, charts, stats, statistics, trends, dialtone density, dialtone, accounts, activity, metcalfeslaw

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Projection: Skype could hit a $1Billion Run Rate in 2010

Projection: Skype could hit a $1Billion Run Rate in 2010, originally uploaded by PhilWolff.

Skype could have their first $250 million quarter between 2010q3 and 2011q2 based on simple linear and polynomial trend lines. Skype's rates of user acquisition have grown steadliy, and price per minute has been stable within a narrow range.

Trendlines ignore Skype's new revenue streams. For example, Skype for SIP trunking (your company telephone switch can choose to SkypeOut instead of your local phone company) and Skype business video conferencing (a hypothetical business to compete for GoToMeeting and Cisco WebEx business) could become $100 million businesses in 2011.

Skype gave away $12.9 billion in free international calls in 2009

One in nine cross-border minutes was a free Skype-to-Skype call last year. That's $12.9 billion in international calls Skype gave its users for free assuming Skype's customers would pay a world average market price of roughly $0.24 per minute.

Did Skype take those billions from telephone companies?

Just a little.

Telephone companies don't offer much in the way of differential pricing, charging more to people who'd pay more and less to people who'd pay less. So they leave a large underserved market.

Skype is happy to serve them.

Skype is also making the market bigger. When you make Skype-to-Skype calls, you don't worry about the cost of the call; just your time and your Internet connection. Skype voice calls can run for hours without anyone feeling anxious about using up minutes or the phone bill. So not only is Skype bringing underserved callers into the international calling market, Skype is encouraging them to speak longer and call more often.

Looking at the chart, people have been substituting Skype's free/cheap, simply priced, IM-style calling for expensive, unpredictable, and hard-to-dial PSTN calls. This bids down the market price of all calls. That's been going on for years; the average price is one fifth of what it was fifteen years' ago. It also slows the growth of PSTN calling as people switch to Skype.

The trend line shows Skype serving 75 billion minutes this year and 100 billion in 2011. That assumes Skype doesn't do anything new, like improving virality, usability, availability, presence, accessibility. You know: things that bring more people in and get them to call more people, more often, for more minutes.

tags: skype, competition, international, longdistance, pricing, chart, stats, statistics, trends

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Skype Dialtone: 22 million online.

22,268,233 Skype clients logged in at the same time, up from the 21.5 million record last Monday.

Here's the updated trendline going back from the beginning.

While a straight line explains 97% of the data, a polynomial regression fit gets us to 99%. The curve guesses 26 million people online at the same time by year's end. This on a base of more than 520 million user accounts.

My crude estimate puts active Skype users, people who log in over a two week period, about 132 million. This allows for different time zones and for people who use Skype for very short sessions during a month.

tags: skype, stats, statistics, trends, online, trend, charts, graphics, performance, dialtone, dialtone density, chart, simultaneous, concurrent

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Skype Dialtone: 21.5 million simultaneous online – new record

Dialtone is a promise. It's the promise of connection. To humanity, to family, to government and social services. It's a promise your phone will ring when someone calls. 

Skype Journal,
20 August 2007

Skype's dialtone continues to grow. 21.5 million people were logged in on Skype's network Monday, 11 January. Compare this to Tencent's QQ instant messenger network, boasting a dialtone of 75.5 million at the end of 2009q3.

Skype's dialtone reached 20 million on November 9, 2009. That puts growth at 25K more people getting online daily, net of people who leave the network, in the last 63 days.

How fast is that growth? If everyone at the 2010 Consumer Electronics Show signed up during its four days, they'd be skyping by now.

 

This continues a fairly linear trend.

Skype's dialtone is a product of:

• The number of people with accounts.
• The amount of time they spend logged in on any given day or over week.

Dialtone is good for Skype. It measures the chances that someone you know (or someone you don't know) is available to talk. Dialtone shows the strength of Skype's network effects, its capacity.

Skype encourages dialtone growth with every strategy. Device choice, so you connect how you like. Wi-Fi access, so you connect wherever you are. Usability so people stay connected and use the network. Skype for Business, so people use Skype even more at work.

tags: skype, stats, statistics, trends, online, trend, charts, graphics, performance, dialtone, dialtone density, chart, simultaneous, concurrent

Call me at +1-510-316-9773, Skype me, follow @skypejournal and @Phil Wolff.
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More M&A: Should Skype buy ICQ from AOL?

What would Skype pay to add 42 million active users in 2010? The $300 million AOL seems to be asking for ICQ may be steep. According to AOL, 1.1 billion messages are sent and received in the five hours per day the average 13-29 year old ICQ user is connected. ICQ is bigger than Skype in Germany, Russia, Ukraine, and Israel.

On the other hand, Skype added 40.3 million new users in 2009q3. Ninety days of growth and an established community would be nice.

Maybe. You could lose half the ICQ users at first switch.

ICQ's proven centralized services were appealing when Skype was desperately seeking alternatives to Joltid's p2p technology. That compelling interest is over.

Techcrunch says South Africa's Naspers (JNB:NPN), a big investor in China's Tencent, expressed interest. Tencent's QQ was inspired by ICQ.

I'm sure AOL values ICQ based on its advertising revenue. Skype is unlikely to

It might be cheaper to hire the Israeli Mirabilis team directly.

tags: skype, aol, aim, icq, is, israel, mirabilis, tencent, naspers, china, russia

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Tencent QQ 2009q3: 1B accounts, .4B active, 75MM online

Ahead of Skype worldwide is Tencent (HK:0700), a diversified Chinese online empire with the QQ instant messaging service at its core. Building on free IM, QQ makes money with "Online Media, Wireless Internet Value-Added Services, Interactive Entertainment Service, Internet Value-added Service, E-commerce, and Online Advertising Service." Tencent had another record quarter.

QQ now has more than a billion (1057MM) user accounts. Active accounts in the last two weeks of the quarter are just shy of half that at 484.9MM. Peak concurrent users rose to 75.5MM. Twice as many accounts and nearly four times as much dialtone as Skype.

QQ's "Dialtone Density" (quarterly peak accounts online as a percent of the number of active accounts online) shows customers are spending more time connected with the QQ network.

Tencent explains their growth as "driven by the popularity of our SNS [Social Network Service] applications which enhanced user engagement and activity through cross-platform integration, as well as increased usage of our IM services through mobile devices."

Tencent has an adjacency strategy, adding businesses that complement their core QQ service and sharing common usernames.

So they have casual gaming, MMO games, FPS games, desktop games, enterprise IM, mobile, email, feedreader, security, media player, download manager, pinyin authoring, news and community portal, search, mobile games, mobile QQ, mobile music and ringtones, blogging, dating, facebooking, online fashion, live video, music sharing/streaming, ecommerce shopping and payment services. They all make money, either through premium services and virtual currency, or through a huge advertising network.

Tencent can deploy service after service because QQ runs on a massive centralized infrastructure. Skype will have to package core capabilities through APIs before they can speedily build new services and let partners build on the Skype network.

See also:

• Watch out, Skype. Tencent steps out from China. Skype Journal, September 2009.
• Tencent QQ continues growth, profitability. Skype Journal, August 2009.
• Tencent's QQ IM triples Skype's dialtone.  Skype Journal, March 2009.
• Tencent's QQ: 45 Million Simultaneous Online, Skype Journal, November 2008

tags: tencent, qq, qqim, performance, stats, dialtone, dialtone density, trends, charts

Call me at +1-510-316-9773, Skype me, follow @skypejournal and @Phil Wolff.
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Skype sold, deal done. No surprises.

Skype blog post ("Great news – we’ve closed the deal with the new investors.") and news release. Investor group pays Skype $1.9 billion in cash, $125 million note for 70% of Skype. eBay buys a $50 million note from them. Investors include Silver Lake, Canada Pension Plan Investment Board, Andreessen Horowitz Fund, and Joltid Limited. Skype now owns Joltid's peer-to-peer intellectual property, free and clear.

All the talent dedicated to replacing Joltid's p2p engine have been reassigned to other Skype engineering projects, like its forthcoming platform for third-parties.

This deal:

• Sold! The bullets, Phil Wolff, Skype Journal, November 6, 2009
• The rumored deal devalues Skype five percent, Skype Journal, November 6, 2009
• How much gold do you pay pirates?, Skype Journal, November 4, 2009
• eBay 2009q3 investor results (the Skype parts), Skype Journal, October 22, 2009
• Volpi's Skype Business Concept: SIP, social, lite, layoffs, Skype Journal, October 14, 2009
• Is Joltid's using the world's best patent troll law firm?, Skype Journal, September 20, 2009
• Lawyers are cheap, Skype Journal, September 17, 2009
• Labor Day thoughts on the 2009 Skype sale, Skype Journal, September 7, 2009
• Who will own Skype? Om picked up the phone, Skype Journal, September 3, 2009
• The Skype sale: Hot Buzz and No Response, Skype Journal, September 1, 2009
• Skype sale: 20 Things We Don't Know, Skype Journal, September 1, 2009
• The Sale as described by the Buyers, Skype Journal, September 1, 2009
• Skype CEO: "Today, Skype begins a new chapter", Skype Journal, September 1, 2009

The last deal:

• Who got what when Skype's investors sold to eBay? Phil Wolff, Skype Journal, June 7, 2007
• Sold to mwhitman, a member from San Francisco, Martin Geddes, Skype Journal, September 13, 2005

tags: skype, sale, spinout, spinoff, m&a, acquisition, ebay, investors, eBay, Silver Lake, silverlake, Canada Pension Plan Investment Board, cppib, Andreessen Horowitz Fund, AndreessenHorowitz, Joltid, p2p, peer-to-peer, intellectual propertyproperty

Call me at +1-510-316-9773, Skype me, follow @skypejournal and @Phil Wolff.
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Skype dialtone reaches 20 million simultaneous online

Skype crossed a new high watermark today: 20 million people online at the same time. At moments, it passed 20.3 million. The last two million-person marks were 14 September and 5 October 2009. Skype added two million in the last 46 days.

Dialtone is a measure of a few things:

• The value of Skype's network effect. The more people you can reach within a network, the more valuable the network.
• The number of people actively using Skype. The number of people using Skype in a day or a week is much larger than the high tide mark. Millions sign in to Skype for just thirty minutes to an hour at cybercafés. Some have dedicated Skype devices or PCs that keep a Skype connection all the time. Many people disconnect after the work day and when they go to sleep at night. All told, I put active users about 120 million signing in a week.
• The health of Skype's user community. Growth is good. Exponential growth is better. Flattening is a warning. Falling needs a fix. Northern hemisphere summers show slow growth so don't worry too much about slowed growth from May through August.

Skype dialtone shows the upper limit, the capacity, of the Skype network. So far, so good.

Hat tip to Skype's Peter Parkes for the tweet. 

tags: stats, statistics, trends, skype, online, trend, charts, graphics

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Sold! The bullets

1. The deal values Skype at $2.75 billion.
2. Index is out, freeing up 2.4% of the equity.
3. Niklas Zennström and Janus Friis are in.
4. They are contributing Joltid software for 10% of the company.
5. They are paying $83 million for 4% of the company (a discount, since that would value the $2.08 billion).
6. They are dropping the ugly lawsuits.
7. eBay will keep 30%, instead of 35%.
8. eBay still gets $1.9 billion cash.
9. Silver Lake, Andreessen Horowitz, and other investors will own 56%, down from 65%.
10. This values the Joltid IP at $275 million.

This begs the question: Why didn't Meg Whitman buy the Joltid IP when it was vastly cheaper in 2005? In 2005 the only market for the Global Index was to iffy music sharing services without a business model.

Congrats to all for this stage being over. So will Skype's next big liquidity event be an IPO or a merger? If M&A, with whom?

eBay's release:

Nov 6, 2009

eBay Inc.

eBay Inc. and Silver Lake Investor Group Settle Skype Litigation with Joltid Limited

SAN JOSE, Calif.--(BUSINESS WIRE)--eBay Inc. (NASDAQ: EBAY) today announced that the investor group led by Silver Lake, which had previously entered into a definitive agreement to acquire a majority stake in Skype from the company, has reached a settlement agreement with Joltid Limited and Joost N.V. that gives Skype ownership over all software previously licensed from Joltid and ends all litigation currently pending against the investor group and eBay at the closing of the acquisition.

As part of the settlement agreement, Joltid and Skype founders Niklas Zennström and Janus Friis will join the investor group, contributing Joltid software and making a significant capital investment in exchange for a 14 percent stake in Skype. As a result, Silver Lake and other investors including Andreessen Horowitz and the Canada Pension Plan Investment Board (CPPIB), will together hold 56 percent of Skype and eBay will retain 30 percent. As previously announced, eBay will 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 deal, which values Skype at $2.75 billion and is not subject to a financing condition, is expected to close in the fourth quarter of 2009.

“Skype will be well positioned to move forward under new owners with ownership and control over its core technology,” said eBay Inc. President and CEO John Donahoe. “At the same time, eBay continues to retain a significant stake in Skype and will benefit from its continued growth. We look forward to closing the deal and focusing on growing our core ecommerce and payments businesses.”

Commenting on the agreement on behalf of the investor group, Silver Lake Managing Director Egon Durban said: "We are very pleased to have the litigation resolved. We remain confident in a great future for Skype, and we look forward to working with Niklas, Janus and the other investors as partners to help the company achieve its full potential."

The investor group will no longer include Index Ventures, which has withdrawn from participation. Commenting on its decision to withdraw, Danny Rimer of Index Ventures, said: "We are pleased that Skype will now be able to put litigation behind it, and we wish Josh Silverman, his team and the Skype investors well in continuing to grow a great business. Although Skype has the potential to be a great investment, the deal terms changed for Index such that it no longer matches our investment criteria and thus we have decided not to participate in the transaction."

tags: skype, ebay

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The rumored deal devalues Skype five percent

UPDATE: MORE TO COME.

The September 2009 deal valued Skype at $2.9 million. Post-deal, eBay would own 35%, Silverlake 50.6%, Canada Pension Plan (CPP) Investment Board 10.26%, Index Ventures Growth Fund 2.39%, Andreessen Horowitz 1.71%.

The new deal, as described by Kara Swisher, shuffles the percentages. Skype's founders get 10% of Skype in exchange for Joltid's intellectual property. (Does that mean the company? the software? permission to use the software? putting the software in the public domain FTW?). The founders can buy another 3% for $83 million cash. So 13% to the Z/F.

This means two things.

First, someone is giving 13% equity to Z/F. Beyond Index's 2.4%, where does the other 10.6% come from? Would the new investors devalue their stake? If eBay is paying off Z/F, they'll cut their ownership from 35% to 24.4%.

The rumored $83MM for 3% values Skype at $2.76 billion, discounted $157 million (5.4%) from the $2.92 billion when the deal was announced. Sweet for

No word if the investment is through Niklas Zennström's and Janus Friis's Atomico Ventures. Atomico's portfolio touches all around Skype without intruding. A maker of Bluetooth headsets, a Wi-Fi network that partnered with Skype, a phone speech-to-text service, a lifestreaming service, a payment service, a realtime conversation search engine, a live video streaming platform, an inbox relevance engine, a live video dating site. If nothing else, this shows Z/F understand Skype's adjacencies, markets Skype could enter or support.

tags: $skype, $ebay, Aliph, Fon, Heysan!, Jott, Kyte, Last.fm, mydeco, Seesmic, Technorati, TrialPay, Woome, Xobni

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eBay 2009q3 investor results (the Skype parts)

eBay says Skype sale is on track for mid 2009q4 (November). eBay's cash will live offshore; no immediate plans for it.

Let's look at Skype's performance for July, August, and September this year.

First, Skypers called for 30.8 billion minutes this quarter.

Not only did Skypers call more, more were connected to the Skype network at the same time. Skype's peak dialtone figures crossed the 19 million mark earlier this quarter. Dialtone is a measure of network availability.  

While both Skype-to-Skype and Skype-to-PSTN activity grew, Skype's Freemium Rate (the ratio between the two) also rose to a new high. The freemium rate is the number of free minutes per paid minute. It indicates demand for the premium service and suggests the company's ability to convert free users to fee services. We'll watch to see if this trend continues.

Skype's customers paid $185.2 million this quarter. Revenue continued to grow outside the US but fell slightly in the US.

Skype's prices are stable despite pressure from competitors. Revenue per minute is $0.06, rising again for the second quarter in a row.

While Skype doesn't report active user accounts or abandoned accounts, Skype did say it picked up 40.3 million new users in the third quarter. That's 442,857 new users daily. That's a measure of the effectiveness of Skype's marketing, customer word of mouth, and network effects.

The smart Hudson Barton Real Users Estimate is now over 47 million users, approximating the number of people actively using Skype. My naïve estimate is roughly 114 million people use Skype in a given month.

 

eBay reported the effect of the Skype deal on their financials. 

They will sell 65% of Skype for about $1.8 billion in cash, most of it outside the United States. I assume they'll spend it on future M&A.

They expect Skype to contribute $100 million in profits in the first 45 days of the fourth quarter. After that they don't expect to see Skype post much profit since it will be paying "interest costs and amortization of intangibles."

I'm assuming the 2009 Annual report and 10K will include data for the last six weeks of Skype's activity before the sale. After that, Skype will be privately held and won't need to report financial information.

tags: ebay, skype, financials, charts, trends, stats, statistics, performance

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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.

Where's the value in Skype buying Gizmo5?

Michael Arrington broke a rumor that Skype is in talks to buy Michael Robertson's Gizmo5. I don't see much value.

You buy a small company for five things: cash flow, IP, brand, relationships, and people.

Does the firm produce cash flow? When you make half-a-penny a minute, you must sell a gazillion minutes. When you have intense competition, manage churn. When price-per-minute falls, find non-minute sources of revenue. When market prices fall, build volume for buying power over your termination suppliers. As of March 2009, "Gizmo5 serves more than six million consumer and business users" after six years. Skype adds that every 17 days. I don't know if Gizmo5 has been successful enough to create attractive cash flow. If Skype owned the business, could Skype quickly build profits?

Gizmo5's IP prime asset could be its SIP gateway. They've built on top of it a SIP-to-Skype (OpenSky) gateway, support for Google Talk, and Gizmo Voice, a Gizmo5/Google Voice mashup. If the code is good enough, it might be the base of an enterprise server product or a hosted service. If you trust Julian Cain's critical fact-checking comments in Mike's story, I doubt the code would survive due diligence. If the systems is rock solid, scalable, and easy to adapt, Skype might save two to six months development time by buying.

The brand is fine for VoIP geeks, is known to buyers of cheap/free calling. However Gizmo is far from a broad consumer brand. Test for yourself.

Gizmo5's business relationships are available to Skype with a phone call. No exclusive channels of distribution. No high value marketing partners. No namespaces bringing millions of new Gizmo users. 

Which leaves the team. I have no idea if they have real depth of SIP talent, well integrated as a team. But it wouldn't be hard for Skype to cherry pick the entire industry for the best SIP coders, architects, and production operations staff.

Out of all of these, is there enough value that Skype might buy the company?

Maybe.

Robertson is a pirate in the entrepreneurial sense: he's smart, flexible, opportunistic, and aggressive. He might add a healthy bloodthirst to Skype's buttoned-down corporate/geek culture.

How much should Skype pay for Gizmo5?

Nothing. Don't Bother.
$1 million
$5 million
$10 million
$20 million

Total: 0 votes Nothing. Don't Bother. $1 million $5 million $10 million $20 million Other

photo by J.D. Lasica.

tags: skype, gizmoproject, gizmo5, michaelrobertson

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Skype dialtone record: 18 million online at the same time

Guest post by Jean Mercier, Skype Numerologist.

The best measure of the growth of Skype users is still the top "concurrent users online." After the "usual summer recession," we finally reached today a new top of 18 million concurrent users online at about 16h GMT.

I am really happy to see that Skype is still growing as expected.

tags: skype, stats, charts, trends, statistics, online, dialtone, simultaneous

Call me at +1-510-316-9773, Skype me, follow @skypejournal and @Phil Wolff.
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Labor Day thoughts on the 2009 Skype sale

1. eBay's post-Whitman management gets credit for doing something right. Staffing the right executives in 2008. Letting the new leaders turn the startup into a company worth selling. Sending the right signals to potential buyers. Getting the deal done. Not rewarding the founders for their Joltid extortion. Nice way to turn things around!
2. Silverlake controls everything. With Silverlake Partners owning more than 50% of Skype Ltd., it's their call when to float Skype stock in the future or sell Skype to another company.
3. Skype will fund its own expansion. Don't expect cash infusions for acquisitions, infrastructure, labor intensive services, or advertising. Skype has been producing more than $10 million monthly in free cash. Skype's roadmap will chew up all of it just for internal growth and to create cash reserves.
4. Skype will keep its overall direction and product strategy. Skype doesn't need to rethink its business anytime soon.   
5. The SEC pipeline of data will be gone. eBay's 2009q3 10Q report (coming this October) may be the last detailed reporting of Skype operations and finances ever. Privately owned companies need not report performance unless they float stock.

Five product changes I expect from Skype in the next year.

1. Better P2P. Skype will first deploy a simple functional replacement of the Joltid P2P engine. They will improve it, building in six years' of real world experience Joltid never had. Skype should be able to make its P2P network more resistant to Internet outages and blocking, more resilient in the face of damage to the peer fabric, more efficient in finding and routing connections between users.
2. Better video. Perhaps their own video codecs. Higher resolution video as cameras and PCs catch up. Multiparty video calls. Better use of processors, including video digital signal processors. 
3. Skype Inside. A clearer platforming strategy, building on their experience with Skype Lite (clouds of Skype supporting thin, mobile Skype clients) and Skype For Asterisk (adding UI-free Skype clients to someone else's servers). Think "Communications as a Platform," where you can build Skype messaging, presence, and calling into mobile, desktop, and server applications.
4. ID anguish. Skype has an immature user identity model, left over from instant messaging services in the mid 1990s. We'll see greater conflict between Skype's two identity systems. Skype's consumer and corporate Skype names (user IDs) aren't interchangeable although their users and markets overlap.
5. A little less anti-social. Skype's great at talking with people you know. It does nothing to help me find interesting, entertaining, or useful strangers. Almost nothing (do birthdays count?) at helping me curate my friends and cultivate my relationships over time. Skype backed off from supporting its Skypecasts service (hosted calls with moderated Skype chat backchannels) and Skype public chats (web links to group text chats). Skype will research how to help people do more during a conversation (collaboration) and how to add more of the value found in other social media (discovery, ridiculously easy group formation, social gestures, non-conversational messaging).

tags: skype, silverlake

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photo credit: underlying photo CC BY 2.0 by Casey Serin.

Who will own Skype? Om picked up the phone

It looks a little like this:

Om Malik estimates:

• Silverlake Partners: $1.48 billion.
• Canada Pension Plan (CPP) Investment Board: $300 million.
• Index Ventures Growth Fund: $70 million.
• Andreessen Horowitz: $50 million or a sixth of Marc Andreessen’s new $300 million fund.

So that almost answers #5 of our twenty spinoff questions "How is the investor pool structured and divided? Which funds and people own what?" We don't know if they'll all get the same stock, seats on the board, if anyone (banks, executives, employees) get small slivers of Skype Ltd. We also don't know who invested in Silverlake's fund.

tags: skype, investors, ebay, silverlake, cpp, indexventures, andreessenhorowitz

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Some Skype connection fees up from 3.9 to 7.9 cents per call

Skype-to-Skype calls are free. Skype sometimes charges you a small connection fee for Skype-to-PSTN calls in addition to your per-minute rate. The rates to non-"Global Rate" markets go up four cents per call on Sunday, 6 September 2009 to US$0.079 (about 8 cents).

CORRECTION: "With a calling plan there is never a connection fee, regardless of where you call".

Do you have one of Skype's calling plans? Calls are free of connection fees.

Without a calling plan you'll continue to pay 3.9 cents for each call to mobiles or landlines in Skype's Global Rate markets (listed below). Now, without a plan, your connection fee is 7.9 cents per call outside those markets.

The Global Rate destinations: Argentina - Buenos Aires, Argentina - Cordoba,  Australia, Austria, Belgium, Canada, Chile, China, Czech Republic, Denmark, Denmark - Shared Cost, Estonia, France, Germany, Greece, Guam, Hong Kong, Hong Kong - Mobile, Hungary, Ireland, Israel, Italy, Hungary, Korea, Republic of Luxembourg, Malaysia, Mexico - Mexico City, Mexico - Monterrey, Netherlands, New Zealand, Norway, Norway - Shared Cost, Poland, Portugal, Puerto Rico, Russia - Moscow, Russia - St.Petersburg, Singapore, Singapore - Mobile, Spain, Sweden, Switzerland, Taiwan, United Kingdom, USA.

Why did Skype raise the rates?

Does this new pricing simplify buying and calling choices? Does it make Skypers switch from pay-as-you-go to a subscription? Does it help prevent predatory calling or unwanted telemarketing? I think not. Most people will not notice the four cent increase. Are termination costs really higher outside of Skype's Global Rates markets? Possibly. This might offset those costs.

How much more revenue will this price increase bring?

Skype doesn't report the number of calls made or call volume by country. So let's guess [See the Google Docs spreadsheet and play with the the numbers yourself]. Skype reported 3 billion minutes of SkypeIn/SkypeOut calling. Let's say ten percent are to non-Global Rate markets (I suspect it's a larger share). And that Skype calls average 10 minutes (much longer than the average PSTN call, a little shorter than free Skype-to-Skype calls). 3x(10^9) minutes * 10% of all calls / 10 minutes per call. So, 30 million calls per quarter. At 4 cents more per call, that puts new income around $5 million each year. Or more. What's your guess?

tags: skype, prices, rates, connectionfee, tariff, analysis, strategy

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Skype employees: exercise your calendars

Skype filed an update to a August 10, 2009 filing about employee stock purchase and awards with the U.S. SEC (pdf file).

"Q32.     If I am a Skype employee, can I still participate in the eBay Stock Option Exchange Program? What will happen to my eligible options and new RSUs if the sale of Skype is completed?

A32.     Our agreement to sell Skype raises important matters for you to consider in making a decision whether or not to participate in eBay’s Stock Option Exchange Program. Here are some things you should consider in evaluating whether or not to participate in the Stock Option Exchange Program.

As we have announced, we expect that the sale of Skype will close during the fourth quarter of 2009. If the sale of Skype is completed, as of the closing date of the sale you will no longer be an employee of eBay or one of its majority-owned subsidiaries. If you participate in the Stock Option Exchange Program and exchange your eligible options for new RSUs, you must be an employee of eBay or one of its majority-owned subsidiaries on the vesting date of the RSUs in order for the RSUs to vest. If your RSUs do not vest, you will not receive shares of eBay common stock under your new RSUs. The earliest vesting date for any new RSUs received in the Stock Option Exchange Program will be the first anniversary of the completion date (i.e., in September 2010).

As a Skype employee, if you decide not to exchange eligible options through the Stock Option Exchange Program, you generally will have three months or 90 days from the completion of the sale of Skype to exercise any vested options. Your vested options will only have value if eBay’s stock price is higher than the exercise price during the period in which you are eligible to exercise your vested options. Unvested options will expire upon completion of the sale.

Only you can decide whether or not to participate in the Stock Option Exchange Program.”

My advice: 1. Get a chartered accountant or an employment lawyer to review your situation this month. 2. Skype/eBay HR will brief you; don't skip the sessions. 3. Draw a timeline showing all the dates and decision points. 4. Test your plan against the scenario where you leave the company. 5. Get your paperwork in early.

tags: skype, hr, stock, financials, spinout, spinoff

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Skype sale: 20 Things We Don't Know

Things we don't know about the sale of Skype.

1. Who are the unnamed investors providing the bulk of the $1.9 billion in cash? [Update: We know a little more.]
2. Are Skype's founders among the new investors?
3. Which large competitors joined the investor pool? Big telecom companies? Cisco? Microsoft? Google? [Update: We don't know who put money into Silverlake Partners]
4. Any Recovery.gov funds find their way into the investor pool?
5. How is the investor pool structured and divided? Which funds and people own what? [Update: "The CPPIB, which manages retirement funds for Canadians, will put up $300-million in cash for a 15 per cent stake, The Globe and Mail has learned." That's 15% of the 65%.]
6. Who will sit on Skype's board? Who will chair?
7. Will Marc Andreessen remain on eBay's board? Is there a conflict of interest?
8. What is the timing? "The transaction, which is not subject to a financing condition, is expected to close in the fourth quarter of 2009." What are the steps the parties must complete? In what order? By when?
9. Do the investors require Skype resolve the Joltid lawsuit before closing?
10. What bank is handling the transaction? 
11. What assets are included in the sale? What intellectual property?
12. Are there any regulatory hurdles?
13. What secures the "note from the buyer in the principal amount of $125 million"?
14. Will employees get a taste of the spinoff capital? Bonuses?
15. Will all employees stay or will some return to eBay?
16. Why is eBay holding 35%? To reconcile asking and selling price? via @aswath
17. Can eBay still IPO its 35% post-sale shares?[Update: Maybe, but the other investors and the company management would have to agree.]
18. What is the investors' exit strategy? IPO? @andyabramson. [Update: Maybe, but eBay and the company management would have to agree.]
19. Will the official headquarters remain in Luxembourg? [Update: Yes.]
20. If eBay investors are as angry as Om Malik says they should be, can they block the sale? (Shades of Yahoo!-Microsoft)

tags: skype, ebay, ipo

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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

Call me at +1-510-316-9773, Skype me, follow @skypejournal and @Phil Wolff.
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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

Call me at +1-510-316-9773, Skype me, follow @skypejournal and @Phil Wolff.
Visit our Skype Journal private roundtable, one of the longest running public Skype chats.