Skype Impresses with Voice and Video Conferencing

| Jan 10, 2011 | Consumer Services - U.S.
| Analyst: Weston Henderek

Event Summary

January 6, 2011 -- Skype disclosed at CES 2011 that, according to TeleGeography, the provider’s share of international calling minutes jumped from 12% in 2009 to 24.7% in 2010, with 40% of those minutes as video conferencing. Skype also unveiled a multi-party video conferencing feature and announced that it has acquired Qik, a provider of mobile video software and services. At a separate event, Verizon Wireless and Skype jointly announced that Skype mobile with video will soon be available on select Verizon 4G LTE handsets.

Quick Take

Analytical Summary

• Current Perspective: Positive on Skype’s impressive growth in international voice market share, the percentage of video conferencing traffic, and the company’s moves to enhance its video capabilities and features, because while overall international voice traffic has declined, Skype has doubled its market share of voice calls and grown video calls from 30% to 40% of its traffic in the process. Its addition of more video features, integration with Verizon Wireless, and acquisition of Qik can help its video conferencing business grow even faster.

• Vendor Importance: High to Skype, because the company has filed for an IPO, and showing growth is critical for a successful IPO. By showing growth and continuously improving success rates and adding new features, Skype is better positioned to be financially successful as it seeks to raise investment capital. Good news is also important to counter the company’s well-publicized network outage in late December.

• Market Impact: Moderate on the voice calling market, because Skype has never positioned itself as a substitute for full phone service; rather, it is seeing success at capturing international calls. The announcement will have a high impact on the consumer video conferencing business, because Skype is taking a lead role on features by adding wireless integration and multi-party calling, all for about half the price of a Cisco umi solution that does not have integrated mobile calling or support beyond point-to-point video.

CLIENTS ONLY

Competitive Positives and Concerns

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