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Skype's Plan B to Stay in Business: Buy Gizmo5

Folks at Skype might be getting a tad desperate in their prolonged fight with JoltID, the intellectual property company controlled by the Skype founders — Niklas Zennstrom and Janus Friis. And that’s why they might be looking to buy Gizmo5, a SIP-based calling service started by technology provocateur Michael Robertson. It’s rumored that the company might be taken out by Skype for about $50 million. The rationale behind buying Gizmo5 would be pretty simple.

Skype could buy Gizmo’s technology and build a backend infrastructure. Since Gizmo5 has its own instant messaging, SMS and voice services, the average consumer wouldn’t really see the difference. My sources in the VoIP world believe that it would be a Herculean task for Skype to pull off such an operation. And it would cost a lot of money. But think of it as grafting a pig heart to a human body: It can be done.

Back in February, Gizmo5 launched OpenSky, a new gateway that allowed people using any VoIP service to call Skype users and vice versa. This could come in particularly handy for Skype’s move to enterprise telephony.

Nevertheless, if it does indeed happen it would be a giant victory for Jabber, on which Gizmo5’s IM infrastructure is based. The Skype-Gizmo5 combination would also allow the company to offer an IM client that works with most of the major IM networks.

Robertson has taken every opportunity to take swipes at Skype in the recent past, trying to convince one and all that his SIP-based service was better than Skype. The market forces thought otherwise. Skype has now more than 400 million users and is worth $2.75 billion.

Gizmo5 says it has 6 million users, though it is hard to verify that number. Nevertheless, it must come as sweet vindication for Robertson, who been desperately looking for an encore since his first company, Gizmo5 has raised closed to $20 million, so at $50 million it would give its investors a nice return.

17 Responses to “Skype's Plan B to Stay in Business: Buy Gizmo5”

  1. I would really appreciate that move. Such a deal would bring the necessary growth to the SIP world. The number of real SIP users, who can always call each other for free over the internet, hasn’t grown as needed. SIP grows much too slow to be a viable alternative to PSTN phone networks, half a billion new users from Skype would mean a big boost.

  2. Replacing JoltID with Gizmo5 doesn’t mean Skype has to go SIP everything or need to replace Skype IM with Jabber. In my understanding JoltID is needed in supernode infrastructure: assignment of users to supernodes and determination of the supernode managing a given user. This is needed in a large scale SIP implementation which will have many SIP Proxies. So Skype can use this portion of Gizmo5, but keep everything else from Skype. Migration can be managed since only supernodes need to upgraded.

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  4. Michael Marrs

    SIP was developed to setup video conferences between 2 or more participants. Somewhere down the line the idea was co-opted by telecom engineers to use SIP to replace the SS7 signalling networks that ran between the Telco’s big iron telecom switches. So for the past decade it has been evolving into a monster protocol to mimic SS7. The fact that it can’t figure out how to get past a firewall or NAT device shows you that the people leading its development have ignored the internet and a just using it as a text-based replacement protocol for SS7. As such it is not the appropriate protocol to develop a internet communications infrastructure, xmpp is probably what SIP should have been. Yes the core network infrastructure to support all those Skype users on a SIP infrastructure would be big, but all the Telco’s are moving that way.

  5. Not sure what Skype would really get out of this. Gizmo is a configuration nightmare for even moderately technical users. Even service provisioning is a pain with their a la carte model. Buying Gizmo would be like buying a basket case vehicle – all the parts might be there, but it will take a few months to be sure, and you’d rather be driving, not skinning your knuckles, during those months.

    If Skype wants to buy a SIP/Jabber company there are many that are easy to use right now.

  6. Here’s hoping that Skype – the service – transitions to a technology that keeps their user base happy and their service viable. It seems the biggest challenge though – would be finding sufficient punishment for the legal department at eBay to have paid all that money for Skype, and let them retain the IP in the first place.

  7. I have for a long time wished that something like this would happen, but here’s why I think it’s not practical.

    The Skype protocol (based on JoltID) and SIP are hugely different, philosophically. In order to enable peer-based communications, SIP needs lots of infrastructure in the cloud. Skype’s needs none, instead delegating unwitting users as “SuperNodes” where a SIP infrastructure adds a proxy, managed by the service provider. This would substantially increase Skype’s operational costs (which today are not particularly high).

    SIP addresses peers based solely on fully-routable IP addresses, which is its achilles heel. There are many storied hacks that help it address firewalls, NAT, etc. but they all necessitate some flavour of machinery in the cloud.

    Also, Skype’s protocol travels surreptitiously on an array of ports and works actively to thwart firewalls, proxies, or other means of blocking it. This is one of the attributes that has endeared it to many. SIP travels along known ports and is easily intercepted. My knowledge is not particularly recent, but Gizmo and networks like it do not implement any sort of internet-scale P2P-style service/node discovery protocol.

    Since we’re dreaming, though, a SIP-based API to the network would be a HUGE +1 for Skype and a really exciting way to replace its ill-fated, recently killed desktop API. A network-level API would incite a massive renaissance in VoIP and Presence-based innovation and Skype would be an enabler at a level that would embarrass Twitter and Facebook.

  8. Gizmo/SIPhone is a perfect ‘buy’ for Skype. Leave the JoltID proprietary junk in the scrap heap. Tom is a friggin idiot if he can’t see the value in knowing how to serve multi-million SIP users.

  9. This is getting weirder by the day! Hey eBay, wake up and honor the deal with Skype founders or your going to knife the baby! Don’t screw with the 400 million users who are telling you what they want, and in case your completely clueless, thats Skype with the JoltID hash technology!

  10. SIP and jabber are completely open standards. Skype could easily implement either or both. i just do not see a value in the ‘technology’ used by GIzmo5. As far as a value in the subscribers 5 million is a drop in the bucket for skype. perhaps the real motivation is to shut down both opensky and the GoogleVoice link to the SIP world.

    • I agree. For SIP and Jabber, they don’t need Gizmo.

      Moreover, Skype has started working with Digium for back-end and enterprise solutions. So Gizmo acquisition is out of place here. Gizmo user-base is peanuts for Skype – so even that is ruled out for acquisition.

      Browser based telephony (Flash)??? Possible! but again, for that, Gizmo has no technology of its own. For that, there are better players in the market like Tringme, Flashphone. So that should be ruled out too…

      Robertson’s connections ?? Yep, that could seal the deal :)