Skype, with its spinout from eBay complete and its legal troubles with founders Niklas Zennstrom and Janus Friis settled, is looking to the future, where it wants to become a ubiquitous real-time communications platform. And that means thinking about the next-generation Skype architecture and hiring a lot of smart people, CEO Josh Silverman said in a conversation earlier today. “We are looking to hire engineers,” he said. “Especially those who want to live in Estonia.” In addition, the company is planning to ramp up its Stockholm (Sweden) office. “We are going to be ramping our presence in the Bay Area as well,” Silverman said. Skype currently has 700 employees and wants to hire engineers and product managers to help it expand as it seeks to transform itself from just a voice-based service to a multi-feature real-time communications platform.

“While Europe is going to remain our base, California is going to be a big presence for us,” Silverman said. Skype recently added SIP Guru Jonathan Rosenberg as its chief technology strategist, and he is based in the San Francisco Bay Area. The company had built up a substantial team in the Bay Area over the past few months as it was trying to build a route around the JoltID technology. With that need gone, the company now has enough engineering talent to start transforming itself into a platform.

“We want Skype to be embedded in more and more devices, and we want to offer our APIs for developers to embed into their applications,” Silverman said. That is going to be a tough sell considering the company’s history of throwing its developers under the bus, the most recent example being the Skype Extras disaster. Silverman was candid enough to admit that the Skype Extras program wasn’t working. “APIs were hard and the extras-software uptake was low, and it is important for us to have a great platform that is built for success,” he said. “So starting off a bad platform wasn’t a good idea.”

When I pressed Silverman on the embedded ambitions, he outlined a future where Skype would be embedded in connected game consoles, televisions and video phones. Skype could be embedded into different software offerings as well. The company wants to be a big player in the enterprise, but knows that it can’t do it all by itself. “We need to open up our platform in order to expand it,” he said, “Our aspiration is ubiquity.”

Silverman declined to offer any specific dates (and details) on when Skype will launch a platform for others to leverage. One thing is for sure, Skype can pose a serious challenge to some of the upstarts such as Ribbit, TringMe and Twilio that are all trying to make it easy for application developers to embed voice-related functionality into their offerings. Skype’s ubiquity — over 500 million subscribers — makes it a fearsome agent of change in the Internet-based communications arena. (Related post: “How Skype Can Quickly and Easily Become a Social Network (and Clean Facebook’s Clock))

Toward the end of our conversation, I asked Silverman about the next generation of Skype architecture, and he said the company was working on it. “It will work with SIP; it will have P2P, but we won’t come to it with a religion,” he said. And that includes offering Skype via a browser and making it even more savvy about video conferencing.

Photo of Josh Silverman courtesy of Phil Wolf via Flickr. Skype desktop photo courtesy of IPVEO.

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Posted by Om Malik on GigaOM  |  Permalink  |  10 Comments
Tags: Janus Friis, Josh Silverman, Niklas Zennstrom, VoIP

Fring, the mobile messaging and social communication tool that works on many smartphone platforms, is now available on the Android platform. Users of Android phones can get the client software from the Android Market or from Fring’s WAP site.

Fring for Android works over 3G, GPRS or Wi-Fi connections. According to the company’s blog announcement:

“Android device users can now get onto fring (we know you’ve been missing us since some of you recently switched to Android devices) with (the first) free VoIP calls over Skype, MSN and GoogleTalk and via hundreds of SIP providers. As always you can see real-time presence and live chat with your ICQ, Yahoo! And AIM buddies too. You can also use Twitter there, as part of  your integrated contact list.”

The “we know you’ve been missing us” snippet in the announcement belongs there, as competitive applications such as Nimbuzz have already been available for Android for some time. Still, free VoIP calls over Skype with Fring will probably be pretty attractive to many users of Android phones, and Fring offers a number of options for keeping up with Twitter.

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Posted by Sebastian Rupley on GigaOM  |  Permalink  |  3 Comments
Tags: Android, Fring, LTE, smartphones, VoIP

First Cisco Systems decided to buy Norwegian video conferencing equipment maker Tandberg for about $3 billion. This week, Logitech, a Swiss computer peripherals maker, acquired LifeSize, an Austin, Texas-based private company, for about $405 million in cash. The two deals have brought the fast-growing but often-overlooked video conferencing market into sharp focus. And that is good news for Polycom, a Pleasanton, Calif.-based conferencing equipment maker, CEO Bob Hagerty boasts. Here is why:

Hagerty said he thinks his company’s independent status will make it a preferred partner for giants such as Microsoft, IBM, Avaya and Hewlett-Packard, as they duke it out with Cisco and Logitech. The stock market seems to agree with him: Polycom stock is up 9 percent this month and up 77 percent for the year to date. When I asked Hagerty if this makes him takeover bait, he predictably dodged my question.

The simultaneous growth of pervasive broadband, improved compression codecs, distributed work forces, and shrinking travel budgets are brewing a perfect storm for the video conferencing market. “Bandwidth today is adequate, and we will soon be able to make HD video calls on a 500kbps connection,” he said. Hagerty believes that is going to help the use of video conferencing explode.

For a company like Polycom, the future might involve offering cloud-based services that could handle video originating from multiple locations using a central service. From low-cost end points to high-end telepresence systems, video-based collaboration is going to be a standard, he argued. And this is good news, not just for him but also for his rivals.

Hagerty didn’t pull any punches in his comments about Cisco. “Cisco [uses] a lot of words, but [there] is not much clarity on what products they will focus on,” he said in an interview. While Tandberg’s offerings are more standards-based, Cisco’s flagship telepresence products are proprietary in nature, Hagerty said.

“In the collaboration space, we are a great brand,” he said. “Frankly, it is great to be us…We are the last standing independent company of scale.” He is betting his close relationships with Avaya, Microsoft and others such as IBM — all enemies of Cisco — are going to help his company. In addition, Polycom thinks working with service providers, including phone companies, is a good way to make video conferencing available as a service.

Despite his bravado, Hagerty needs to worry about both Cisco and Logitech. These are two companies with deep pockets and deeper sales forces. They are desperate to make a splash in this market and are going to aggressively compete with Polycom. As I am one of those folks who always expects the worst — it must be my age — I believe that when there are multiple parties competing for domination of the same market, someone is left bleeding. Polycom is betting that the company’s friends will prevent it from being laid out on the mat.

This article also appeared on BusinessWeek.com.

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Posted by Om Malik on GigaOM  |  Permalink  |  2 Comments
Tags: Cisco, CSCO, HPQ, IBM, lifesize, Logitech, msft, Polycom, tandberg, video conferencing, VoIP

Meg Whitman, former chief executive officer of eBay,  defended her decision to buy Skype in a radio interview with KTKZ’s Capitol Hour featuring Eric Hogue. Whitman is running for the office of the Governor of California on a Republican ticket, and is currently leading in the Republican primaries. Here is what she had to say on the show.

Hogue noted that “one of your opponents, Steve Poizner, referred to the fact that it was you as CEO of eBay that spent $2.1 billion on Skype, and that didn’t work, and he’s drawing the comparison here. Is that a fair or unfair comparison here, Meg?” She answered:

You know, we made so many acquisitions at eBay, so many of which were absolutely terrific. PayPal, a lot of our classified sites. And actually I think Skype will prove to be a good acquisition for eBay. You probably read that the company just sold about two-thirds of the interest in Skype to an investor group, kept a portion, and got almost all the money back, and I think Skype will be very effective. So I am very proud of my tenure at eBay. You know we took eBay from 30 individuals, 30 employees to 15,000, from $4.7 million in revenues to nearly $8 billion in revenues. So I’m very proud of the record and proud of the acquisition record.

I commend her for riding the eBay rocket ship, but when it comes to Skype, we all know she blew it. And once again, she dodged the question. How can she defend overlooking and not buying the JoltID technology from Skype co-founders Niklas Zennstrom and Janus Friis? That decision cost eBay another 5 percent of Skype when the auction giant had to settle with the two co-founders.

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Posted by Om Malik on GigaOM  |  Permalink  |  12 Comments
Tags: eBay, meg whitman, skype, VoIP

Broadcom is hoping to lower the price of high-definition VoIP services by taking its BroadVoice codecs open source. But even if this move lowers the price for HD voice, will consumers pay even a marginal premium for a better quality call?

The Irvine, Calif.-based company’s BroadVoice family of voice codecs comprises two variants: BroadVoice32 for wideband speech sampled at 16 kHz, and BroadVoice16 for narrowband telephone-bandwidth speech sampled at 8 kHz. Both will be made available as C source code in an effort to lower the price for broadband operators looking to upgrade the audio quality of subscribers’ calls.

Higher-quality calls are a good thing, of course, and may be a selling point for service providers looking to stand out from the crowd. (Whether they can actually save wireline is far from certain, though.) But quality has often been a less-important feature for consumers, as cell phones (with their mobility) and VoIP (with their lower cost) have demonstrated. Broadcom’s move to open source may result in cheaper HD voice services, but until those prices are nearly indistinguishable from traditional services HD is likely to remain a small market.

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Posted by Colin Gibbs on GigaOM  |  Permalink  |  8 Comments
Tags: Broadcom, VoIP

As a longtime Skype user who never felt that the service fit with eBay, I was thrilled to hear that it’s being spun off. And now I have some thoughts on how it can quickly and easily become an equally successful social network.

In some respects, Skype already is the world’s largest social network, with hundreds of millions of users. And as a peer-to-peer system that generates revenue primarily through outbound phone minutes, Skype doesn’t need to sell advertising, which means that it doesn’t need to infringe on users’ privacy by turning their personal information into a salable commodity for advertisers — in my mind the fundamental flaw of web-based social networks. In other words, Skype has in place a well-established foundation for a social networking system based on privacy and trust. So what might a social Skype look like?

Skype already has a great client for real-time communication: a social graph of people its users know and call. It’s available for every major platform, and given Skype’s popularity, there are a large number of people online at any one time. Each Skype client could serve a XML file with the user’s current status, media files, link feeds and so forth, and to obtain a real-time view of what’s happening with other users, it could call around to folks in a user’s Skype list to get the latest updates. Such a system could be highly decentralized, with most content served directly from one user to another, and largely self-hosted, which means the infrastructure costs would be much lower than a centrally run web service.

The user experience would be effortless. Users would simply see more social features appear in upgrades to the Skype client, with, for example, Twitter-like functionality to broadcast to friends and followers in one panel, a link/news-sharing interface in another. By moving this functionality into the client, apart from a caching mechanism to temporarily store content for users while they’re offline, the need for a centralized web-based infrastructure is greatly reduced.

Apart from poking Facebook in the eye, why should Skype become a social network? Because it would drive phone minutes and SMS messages between friends, which drives revenues — which makes it a smart business decision. Besides, I’ve never bought the idea that a dominant position in a market guarantees long-term success. Skype took out a whole slew of early VoIP networks to become the world’s phone company — it could quickly and easily become the world’s social network, too.

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Posted by Brian McConnell on GigaOM  |  Permalink  |  36 Comments
Tags: skype, social networks

Gizmo5 founder Michael Robertson

Given that most of Google’s customers are also likely Skype users (aka web workers), it makes perfect sense for it to buy Gizmo5. The San Diego-based company recently developed OpenSky, a gateway that allows you to call Skype from any VoIP-based phone/application. As founder Michael Robertson told us at the time:

What we’ve done is create a SIP alias for every Skype user. So if you want to call a Skype user named echo123 you simply dial echo123@opensky.gizmo5.com from any SIP-aware device (which is just about every piece of VOIP equipment). Users can even have any SIP call forwarded to their Skype address using my.gizmo5.com.

This application could come in handy for Google to capture some of the Skype magic as it tries to expand into the enterprise and increase its collaboration offerings. Gizmo5 could also help Google extend its reach on mobiles and bring much-needed expertise for soft clients for voice calls.

Gizmo5 says it has 6 million users; that number is unverified. If the deal is indeed true, Robertson, who been desperately looking for an encore since his first company, MP3.com, must be thrilled. Gizmo5 has raised closed to $20 million, a majority of it coming from Robertson.

P.S.: I want to apologize to readers for writing the original post outlining that Skype had bought Gizmo5. I guess the rumors of Skype buying Gizmo5 were still swirling in my head.

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Posted by Om Malik on GigaOM  |  Permalink  |  26 Comments
Tags: gizmo5, google, skype, VoIP

Skype has hired well-known VoIP expert Jonathan Rosenberg as its chief technology strategist, the company announced today. Rosenberg was highlighted as one of the Cisco executives Index Ventures’ Michael Volpi would bring over to Skype in order to help the company figure out a way around the JoltId stranglehold. As you might know, Skype and Joltid, the company that owns the technology used by Skype (and controlled by founders Niklas Zennstrom and Janus Friis), settled with the company last week.

Rosenberg is well-regarded in SIP circles and his hiring means that Skype is making a stronger push into the enterprise. Rosenberg was a Cisco Fellow at Cisco Systems, where he directed technology strategy for its enterprise voice product portfolio. When I last spoke to Skype CEO Josh Silverman, he was pretty clear about his desire to turn Skype into a major enterprise voice and collaboration player. Rosenberg’s hiring is a smart step by Skype. (Related post: How Skype Plans to Dominate Business Telephony.)

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Posted by Om Malik on GigaOM  |  Permalink  |  4 Comments
Tags: skype, VoIP

Earlier today in response to my post about Nimbuzz, a good pal emailed to find out why the service didn’t work over the iPhone’s 3G connection. After all, a few weeks ago AT&T announced support for VoIP over 3G with much fanfare, a move that was widely applauded, including kudos from FCC Chairman Julius Genachowski.

A month has passed since the decision was announced, and there is still no support for VoIP over 3G. “Apple actually did not approve the 3G calling — so they completely broke their promise of allowing VoIP calls on 3G,” a Nimbuzz spokesperson said.

Even Skype doesn’t work over 3G (see attached screenshot). Truphone is not working either, much like Fring. I am not sure if these services work over 3G data connections in Europe and other parts of the world, but it looks like Apple is the one putting in the roadblock here.

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Posted by Om Malik on GigaOM  |  Permalink  |  43 Comments
Tags: Apple, iPhone, nimbuzz, skype, VoIP

Nimbuzz, a Netherlands-based VoIP and messaging startup, is introducing a premium calling service called NimbuzzOut. This service is available via an upgrade of its mobile client, which is currently available from the iPhone’s iTunes Apps Store, the Ovi Store and GetJar. So far, Nimbuzz has offered a meta-client that works on PCs, Macs, Symbian, Android and the iPhone and allows you to sign into any IM service including Skype. NimbuzzOut is the first step toward revenue for the company, which has pulled in an undisclosed amount of funding from Mangrove Capital Partners, original backers of Skype. In addition to Skype, Truphone and Fring are two other competitors for this fast-growing service. Nimbuzz has been adding about 40,000 users a day, or about a million new registrations every month, and now has a total of over 10 million registered consumers. The company says nearly 30 percent of those registered are regular users.

Nimbuzz has certainly come a long way. At the time of its launch, almost three years ago, we were pretty critical of the VoIP-on-mobile service because it was a me-too offering that was quite a pain to use. A year-and-a-half later, Nimbuzz introduced a new meta client for the Symbian phones. It allowed you to sign into various IM clients. In addition, it allowed some basic VoIP calling, but it wasn’t really until they introduced the new iPhone client that Nimbuzz started to see some serious traction. My previous post gives a good overview of the Nimbuzz feature set.

The company just announced a super communication client for the iPhone that allows you to communicate in many different ways. For instance, you can make free calls over Wi-Fi to your IM buddies. You can also call folks on their landlines and mobile phones with SkypeOut using any one of Nimbuzz’s 10 VoIP partners including Gizmo5, Vyke, sipgate and A1 and, of course, Skype. This is a new feature in the service, and makes Skype In/Out Services more valuable. These services also work over 3G and are described as “Nimbuzz Dial-Up VoIP” which essentially makes it possible to call others by dialing a local access number which then connects to anywhere in the world via Nimbuzz VoIP servers.

For the past month, I have been using the pre-release of NimbuzzOut on the iPhone to place calls to my far-flung group of friends and family. The calling prices are pretty good– about 8 cents a minute to India, 2 cents to the U.S., and 3 cents to the UK. If you look around, that is pretty much what you pay with most services — Skype is a bit more expensive.

The voice call quality is on par with Skype, which is still my communication method of choice for work-related calls. NimbuzzOut is dead simple to place calls: Just hit the call button, and you are good to go. You can, of course, use other calling services, but I don’t see any reason why considering Nimbuzz is offering good rates.

NimbuzzOut has a few features I personally like — you can natively use the phone client to buy additional minutes. I also like the fact that the client uses the native address book and doesn’t create a duplicate contact list. The Symbian client actually lets you edit, add and delete contacts from your address book.

There are a few things I don’t like: If you leave the notifications on, the client will run down your battery and leave the phone pretty useless. If you are using it on an iPhone, then you have to use the Wi-Fi connection, which makes me a tad upset because you can make Skype calls over 3G. You can make NimbuzzOut calls via 3G on Symbian phones, however.

Bottom line: If you are looking for a well-designed, easy-to-use, all-in-one messaging client that also makes cheap long-distance calls, then you don’t need to look any further than Nimbuzz. I have no qualms in recommending NimbuzzOut.

P.S. There is a reward for those who read the complete post. If you are among the first 50 people who send their name and Nimbuzz username to gigaom@nimbuzz.com, the company will give you a $25 NimbuzzOut credit.

Update: This offer is now closed. Thanks for participating.

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Posted by Om Malik on GigaOM  |  Permalink  |  16 Comments
Tags: Fring, nimbuzz, nimbuzzout, skype, Truphone, VoIP

Even though less than 1 percent of the population uses Google Voice, David Erickson, president of the Free Conferencing Corp., a conference call company whose numbers are blocked by the service, is pretty aggrieved. So he met with the FCC and filed a letter urging the regulatory agency to get Google to play fair. He also offered to help Google find lower rates for its rural call termination fees. “Google shouldn’t be able to tell consumers where they can call and where they can’t,”  he said in an interview with The Hill, a trade publication.

Actually, I’m with him on this issue. Erickson’s company may be taking advantage of a legal loophole that the telecommunications companies and now Google want closed, but it’s not clearly illegal (although the loophole is closing). And by providing voice service for customers even as an “Internet application” Google’s decision to limit certain aspects of the service because of the costs might be reasonable for a restaurant owner running a buffet, but is less so for someone providing a telecommunications service.

Such so-called traffic pumping is an issue the FCC has known about for a while, so clearly companies like Erickson’s, which appear to be benefiting from an arbitrage play that boosts costs for carriers that have to terminate calls on higher-cost rural lines, haven’t been morally repugnant enough to get the FCC or Congress to take definitive action to stop them.

Erickson doesn’t think the FCC should step in at all on the issue of overhauling the pricing schemes that result in higher termination costs on rural lines (and generates sales at his company), he says in a letter filed this week with the FCC, but he does request more scrutiny over Google Voice. He’s lost me at this point. If you’re gonna run to a regulator to force someone to play your game, you can’t get upset when the regulator wants to make sure the rules by which you play that game are fair.

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Posted by Stacey Higginbotham on GigaOM  |  Permalink  |  16 Comments
Tags: AT&T. T, free Confeerence Corp., GOOG, google

The final results are in: eBay and private investors led by Silver Lake Partners have struck a deal with Skype founders and JoltID, the technology company controlled by Skype founders Niklas Zennström and Janus Friis. They are also transferring the ownership of intellectual property needed to make sure that Skype works as an Internet telephony service. More than 500 million Skype subscribers can breathe a sigh of relief. Skype founders will be making an investment in the new entity and will get a 14 percent stake in the company. The deal is likely to close in the fourth quarter. Those are the facts. Below the fold you can read my winner-and-loser scorecard on this deal.

Found Money: Zennström and Friis are the real winners here. For a few hundred thousand in legal bills, they have not only managed to wipe out an investor competitor, they have shifted the focus away from the ignominious failure that was Joost. They have turned their ownership of a P2P technology into yet another payday and, most importantly, they are now sitting in the catbird seat to reap the rewards of Skype again. Verdict: Winners

Double-Dipped: In order to get the deal done, both the investors and eBay took a haircut. Investors now control 56 percent of Skype while eBay’s stake is down 5 percent to 30 percent of the new Skype. There is a lot of spin in the press release issued by Skype, but the fact remains as I pointed out on the day this deal was announced, Zennström and Friis had them by the curlies. It was clear that this deal wasn’t going to get done without their blessing.

“Skype will be well positioned to move forward under new owners with ownership and control over its core technology,” said eBay 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 e-commerce and payments businesses.”

Poor John is stuck being the mop-up man. eBay, thanks to the stellar work of its previous management team including Meg Whitman, currently running for governor of California, is paying twice for its mistakes. If my previous employer, Business 2.0, was still publishing the 101 Dumbest Things list, I would make eBay’s original Skype deal as the No. 1 dumbest thing…ever! Verdict: Losers.

Index-ed to Nothing: Now let’s look at this great spin quote:

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.”

Index Ventures and Mike Volpi were the architects of the deal from day one, and so no, they didn’t opt out of the agreement. No one opts out of a deal for which they are happy to bend a few rules. What it means is that they were hustled out, and that tells me two things: This was way, way personal. I have heard it from my sources that there is no love lost between the various entities involved and the lawsuits just brought the hostilities out in the open. Verdict: Losers

Making a Marc: Earlier this morning I spoke with Marc Andreeseen of Andreessen Horowitz and asked him about the deal. “We wouldn’t go through this for just a company, but this is Skype, so from our standpoint it was worth going through,” he said. He pointed out that his firm is all about founders and “we like founders being part of the company.” He added that there is “no emotional baggage and we didn’t take this personally.”

This was a high-profile deal for a new fund. Given that Andreessen Horowitz bet so much of their fund’s total money on this deal ($60$50 million of $300 million), any successful conclusion is a win. Verdict: Winners

Silver Lake Partners: The rest of the investors can breathe easy that this got through. Those personal emails didn’t make pretty reading. The fact that they don’t have to deal with Volpi and Index might be a blessing in disguise. Verdict: Winners

Canada Pension Plan Investment Board: Are they still there…oh cool! Verdict: Meh!

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

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

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

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Posted by Om Malik on GigaOM  |  Permalink  |  7 Comments
Tags: skype

The great Skype legal mess is about to come to an end, thanks to a settlement between  eBay — and private investors led by Silver Lake Partners — and Skype co-founders Niklas Zennstrom and Janus Friis. As part of the deal, the two Skype founders will get 10 percent of the company in exchange for allowing it to use the Global Index technology from their IP company, JoltID. They have an option to pay $83 million for another 3 percent of the new Skype. They will have two board seats on the 23-person board. These details were reported by Kara Swisher on her blog last night. I reported the news of a settlement this past weekend. Since then, more details have emerged that Index Ventures and Michael Volpi were both out of the deal.

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My Early Black Friday Deal Arrived — Panasonic HDC-SD10 jkOnTheRun – by Kevin C. Tofel "; 10 Things to Be Thankful For in Greentech Earth2Tech – by Josie Garthwaite "; NewTeeVee Re-Run: Paul McCartney Cooks Mashed Potatoes NewTeeVee – by Chris Albrecht "; Living by the Numbers: What Happens When You Quantify Everything? WebWorkerDaily – by Celine Roque ";

Posted by Om Malik on GigaOM  |  Permalink  |  4 Comments
Tags: eBay, JoltID, Niklas Zennstrom and Janus Friis, Silver Lake Partners, skype

There is a good likelihood that Skype; its founders, Niklas Zennstrom and Janus Friis; and a group of private equity investors led by Silver Lake Partners are close to settling their legal disputes, allowing eBay to sell 65 percent of Skype for about $2 billion. I had first reported the news this past weekend. As part of the settlement, Zennstrom and Friis are likely to get a board representation, and there is some talk of Index Ventures being out of the deal as well.

Zennstrom and Friis have been locked in a bitter dispute over the use of the Global Index, a key technology owned by JoltID, a company jointly controlled by the Skype founders. eBay, in a stunning breach of fiduciary duty, didn’t buy this technology when it acquired Skype four years ago.

From the way it is understood, Zennstrom and Friis will have a board seat on the newly independent Skype, which would be allowed to use JoltID’s technology. In addition, there is a good chance that Index Ventures, one of the primary architects of the buyout, will not be part of the new deal. Mike Volpi, former CEO of Joost, isn’t likely to be part of the new enterprise.

I am not surprised that Index and Volpi have been left out in the cold. There’s no love lost between Skype co-founders and the Index group. If you read through some of the emails that were submitted along with legal documents filed in support of Joost’s case against Volpi and Index, then you know why.

Some details of the story were reported by the New York Times today. Please check out my previous report on the Skype’s legal fracas, as well, which includes a timeline of events.

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My Early Black Friday Deal Arrived — Panasonic HDC-SD10 jkOnTheRun – by Kevin C. Tofel "; 10 Things to Be Thankful For in Greentech Earth2Tech – by Josie Garthwaite "; NewTeeVee Re-Run: Paul McCartney Cooks Mashed Potatoes NewTeeVee – by Chris Albrecht "; Living by the Numbers: What Happens When You Quantify Everything? WebWorkerDaily – by Celine Roque ";

Posted by Om Malik on GigaOM  |  Permalink  |  14 Comments
Tags: eBay, Index Ventures, Mike Volpi, skype, VoIP

Digg and Slashdot were abuzz earlier this morning with the news that Skype was going to go open source. The buzz was based on a post on a French blog by Olivier Faurax. The news is true and false at the same time. “It is our intention to make Skype for Linux an open source app in the near future and make the UI source code available to the community at large. This should help to speed up the development process and enhance support for the myriad of Linux distros,” a spokesperson told us.

On the Skype blog, a spokesperson writes:

Yes, there’s an open source version of Linux client being developed. This will be a part of larger offering, but we can’t tell you much more about that right now. Having an open source UI will help us get adopted in the “multicultural” land of Linux distributions, as well as on other platforms and will speed up further development. We will update you once more details are available.

What that means is that the core protocol will not be open sourced and will remain closed. I think the point here is clear; a majority of the underlying technology for Skype service is owned by JoltID, a company controlled by Skype founders Niklas Zennstrom and Janus Friis. Skype and its founders are locked in a legal battle over the use of this technology.

It doesn’t look like Skype is going to open source its other clients. I think the ramifications of the Linux version being open sourced are pretty huge. An open source version of the client could lead to Skype being embedded in non-PC devices. One of the best examples of this marriage of Linux and Skype is the new Nokia N900 which uses the Maemo variant of Linux. Skype could be embedded in different Internet devices such as tablets that are being developed by various companies. In addition, it could also help Skype be prepared for new Linux-based OS variants such as Google Chrome OS.

All in all, it seems like a very smart move: the only question that remains is when will Skype actually do something?

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My Early Black Friday Deal Arrived — Panasonic HDC-SD10 jkOnTheRun – by Kevin C. Tofel "; 10 Things to Be Thankful For in Greentech Earth2Tech – by Josie Garthwaite "; NewTeeVee Re-Run: Paul McCartney Cooks Mashed Potatoes NewTeeVee – by Chris Albrecht "; Living by the Numbers: What Happens When You Quantify Everything? WebWorkerDaily – by Celine Roque ";

Posted by Om Malik on GigaOM  |  Permalink  |  3 Comments
Tags: JoltID, Linux, Open Source, opensource, skype

The ongoing legal scuffle between Skype, a division of eBay, and its founders, Janus Friis and Niklas Zennstrom, may soon see a resolution, according to someone familiar with the situation. The parties are in discussions to resolve the various issues. The talks are described to be at a sensitive stage and can break down without any conclusion. If the founders and the company can come to an agreement, Skype will be able continue to use JoltID’s technology to power Skype and not disrupt the service that is currently used by hundreds of millions consumers.

I have some further information on the talks, but I am currently trying to pin down the details, as well as waiting to hear back from Skype and other parties involved in the deal, including the Skype co-founders.  It was pretty evident from the get-go that Skype didn’t have any other option but to come to some sort of an understanding with the founders.

About two months ago, eBay announced that it was spinning out Skype, and the deal valued the Internet telephony division at $2.75 billion. Skype founders had been trying to find a way to buy back their startup, but instead, eBay decided to sell 65 percent of the company for nearly $2 billion to a group of investors led by Silver Lake Partners, Canada Pension Plan, Index Ventures and Andreessen Horowitz. (Marc Andreessen declined to comment on the deal.)

Skype’s co-founders sued eBay, Skype, and pending investors for using Global Index, a core technology held by their company, JoltID. eBay, at the time it purchased Skype, didn’t buy the JoltID technology and instead opted for a long-term contract. The end of that contract has led to the current legal mess of suits and countersuits between eBay, new investors and Skype founders.

One of the key people in this deal was Mike Volpi, once regarded as the heir apparent at Cisco Systems. In his column today, San Jose Mercury News’ Chris O’Brien has more details about Volpi’s current spate of legal troubles. Volpi helped put together a deal that essentially made Skype founders sue him and the venture firm he joined in July of 2009, Index Ventures. If you read through the various emails exchanged between Volpi and Danny Rimer, a principal at Index Ventures, you can understand why the Skype founders are angry, especially since he was the CEO of Joost, a failed video startup founded by Skype’s  co-founders. Volpi was sued by Joost because, he “learned how to modify JoltID’s proprietary software to run on the web without the aid of a peer-to-peer software when he was transitioning Joost from a peer-to-peer service to a web-based Hulu clone.”

In October 2009, the two co-founders filed an injunction that made it virtually impossible for Skype to continue its spin-out. Stacey summed it up nicely:

In addition to preventing Volpi and Index from using confidential information in general, the injunction specifically asks that the judge keep Volpi and Index from using such information to operate Skype or engage in any strategic planning for the service; from talking about that info with the other members attempting to purchase Skype from eBay; from soliciting employees of Joost and Joltid with offers to join Skype; from communicating with current or former employees of Joost or Joltid regarding the companies’ confidential information; and from further participating in the Skype acquisition or assuming any position with Skype until a final adjudication of the merits of the case.

What that means is that in order for Skype to exist it had two options: Do a deal with the Skype founders, or switch to SIP-based architecture. The latter may be an expensive and difficult option. Skype faces various challenges if it tries to switch to using a SIP-based architecture, Ian Bell outlined in his post earlier today. Jeff Bonforte, former CEO of Gizmo5, disagrees and believes that challenges are not unsurmountable, as he outlines in a comment to Ian’s post.

I guess Skype’s buyers and current management might be going with option No. 1. I will be back with more details soon.

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My Early Black Friday Deal Arrived — Panasonic HDC-SD10 jkOnTheRun – by Kevin C. Tofel "; 10 Things to Be Thankful For in Greentech Earth2Tech – by Josie Garthwaite "; NewTeeVee Re-Run: Paul McCartney Cooks Mashed Potatoes NewTeeVee – by Chris Albrecht "; Living by the Numbers: What Happens When You Quantify Everything? WebWorkerDaily – by Celine Roque ";

Posted by Om Malik on GigaOM  |  Permalink  |  27 Comments
Tags: Danny Rimer, eBay, Index Ventures, Janus Friis, Niklas Zennstrom, skype