The deal between between eBay (EBAY) and the founders of Skype to settle a hornet’s nest of litigation brings to a merciful close one of the longest-running and more operatic dogfights in recent years in Silicon Valley: the battle over the technology at the core of Skype’s peer-to-peer based VoIP service. It also relieves the management of eBay of the task of explaining why their predecessors, specifically former CEO Meg Whitman, purchased Skype back in 2005 for the inflated sum of $2.6 billion without getting their hands on the intellectual property behind the company.
More importantly, the deal clears what had become a major roadblock for the VoIP sector and a cloud looming over the advent of IP-enabled communications for business customers. Freed of the clutches of eBay, which never developed a business strategy that integrated Skype’s service, the VoIP provider now has the backing and the customer base (close to 500 million-strong) to answer a fundamental question: Can one of the original over-the-top VoIP providers, with a popular and powerful service but little revenue-per-customer, transition to a high-value, high-margin provider of advanced IP communications services to both consumers and businesses?
A Skype spinoff would be “good for the industry,” said Irv Shapiro, CEO of cloud-based IP telephony provider Ifbyphone, when the sale was first announced. “It really validates the value of applications moving into the telephony cloud.”
The answer to that question, though, is by no means obvious. While Skype has a terrific brand and has built out a business unit that provides intriguing services to business customers, the vast majority of its revenues still come from consumers who pay little-to-nothing for the service.
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