Tag Archive | "microsoft"

D: NFLX Prepares For Deep Spend

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D: All Things Digital, The Wall Street Journal technology conference, is in full swing in Southern California.

Netflix (NFLX) Chief Executive Reed Hastings led off the proceedings this morning talking about international expansion. The Internet movie outfit is going to launch in Toronto first, a “bold” move, going to Canada, he jested. Then, Netflix will open it’s doors in an undisclosed foreign market shortly thereafter.

The upshot: international expansion could hurt profits. “We tell investors that the better it goes, the more money we are going to lose because we are going to invest” more in expansion, Hastings says. He says it takes one to three years for Netflix to establish itself in a new country, which is relatively fast. Hastings, who is a Microsoft (MSFT) board member, would not comment about hedge fund manager David Einhorn’s call for Microsoft CEO Steve Ballmer’s ouster.

He was wiling to discuss his own open letter to short sellers to cover their negative bets, even calling short-selling “healthy” for markets.

“I’m not trying to have a battle with the shorts,” (but) if you have a friend on the short side and you think he’s losing money, and you think he’s wrong, then you want to tell him.”

The conference, now in its ninth year, got off to a rip roaring start last night when News Corp. “acting CEO” Jane Lynch, the star of the Fox Television hit Glee, recommended comic strips be added to the WSJ and other humorous mandates involving Sara Palin and talk show shock host, Glenn Beck.

Google (GOOG) Executive Chairman Eric Schmidt was the opening night keynote. The former CEO, who serves as an advisor to President Obama, says he has no intention to take a cabinet post or agency job, which had been rumored. But he will be active in the coming campaign just as he was during the President’s first election.

Note: For further ongoing coverage of D, see also former Tech Trader editor Eric Savitz’s blog at Forbes.com.

Article courtesy of Tech Trader Daily

Nokia Refutes Talk Of Microsoft Sale; Ticonderoga Likes It

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Shares of Microsoft (MSFT) have been under pressure this morning, and one thing appearing to contribute to downturn are rumors the company would step in to purchase Nokia (NOK) for $19 billion, according to remarks by Eldar Murtazin, a blogger widely credited with scooping Microsoft’s deal with Nokia earlier this year.

Murtazin’s blog appears not to have that claim today, but he is cited as stating such by Todd Haselton in a piece this morning on BoyGeniusReport.

A Nokia spokesperson, however, tells The Wall Street Journal’s Christopher Lawton a short while ago that, “These rumors are completely baseless.”

Murtazin has speculated as recently as May 16th that the two companies were talking about a deal.

Microsoft shares are down 54 cents, or 2%, at $24.47.  Nokia shares are down 34 cents, or almost 5%, at $6.68.

Well, at least one believer this morning is Brian White with Ticonderoga Securities, who follows Apple (AAPL) and has a Buy rating and a $612 price target on that stock.

“We believe reports from Boy Genius highlighting the potential for a Microsoft purchase of Nokia for $19 billion should provide Apple investors with even greater confidence that the company can continue to gain market share at the expense of legacy vendors in the mobile phone market,” writes White.

“In our view, Apple investors could not ask for a better deal, and we believe a transaction would only further Apple’s market share gains in the coming quarters.”

Sounds like White is choosing his words carefully, but it also sounds like he believes the rumor.

Article courtesy of Tech Trader Daily

Microsoft: Positive Prospects For Win ‘Next’/ ’8′, Says Citi

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Amidst rumors that Microsoft (MSFT) is making progress on the next version of its Windows operating system, which may be “Windows 8,” but which is being referred to at the moment as “Windows Next,” and which is expected to make changes to accommodate tablet computers, Citigroup’s Walter Pritchard this morning offers some thoughts on what to expect and what it means to Microsoft.

He sees a beta version by September 15th, he’s not sure if the software will have sufficient “eye candy,” and he thinks that it’s not too late for WIndows to become number two in tablet software behind Apple’s (AAPL) iOS.

Regarding the time frame, Pritchard bases his analysis on what seems to be publicly available commentary from the company, as well as his knowledge of Microsoft’s historical pattern of software releases:

Microsoft has announced “that the next version of Windows will support a new kind of hardware, system-on-a-Chip (SoC) architectures, that will power the next generation of devices” at CES 2011. […] We believe the product shown on stage employed working code and suggest to us that the Microsoft is farther along in the Windows “Next” development process than many expect. The company has repeatedly stated that “24-36 months” between releases is the appropriate timeframe to consider for the launch of the next Windows operating system. With Windows 7 having been released in October 2009, a strict mapping of the “24-36 month” timeline would suggest a release as early as October 2011 and as late as October 2012 release.

What’s more, Microsoft still has lots of “goodwillamong developers, so those coders may fall in line. The appeal for Microsoft’s enterprise customers would be stronger than for the consumer market, he thinks.

From a financial perspective, tablet prices are not so much the concern for Microsoft: “Are tablets a good business? Yes, but it all comes down to unit shipments. We don’t believe ASPs are the most important question.”

Pritchard is not sure the next Windows “will be a raving success,” as he puts it, but the stock is so cheap, the expectations so low, it’s worth a bet in his mind: he reiterates a Buy rating and a $35 price target.

Microsoft shares today are up 18 cents, or 0.7%, at $24.85.

Article courtesy of Tech Trader Daily

Kabam raises $85M for hardcore social gaming business

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Here’s a “kaboom” for all those social game skeptics out there. Kabam has raised $85 million in a fourth round of funding to fuel its business making hardcore games for social networks such as Facebook. The backers include Google Ventures, Pinnacle Ventures, Performance Equity and SK Telecom Ventures, as well as earlier backers.

It’s as good a sign of disruption in games as any. Based on the funding from such heavy-duty backers, Kabam is now one of the most valuable independent companies making games on Facebook. In terms of users, it is far outgunned by market leader Zynga (poised for a possible initial public offering), which has 247 million monthly active users on Facebook. Kabam has just 7.2 million monthly active users. Zynga has raised hundreds of millions of dollars, but Kabam is holding its own, raising $125 million to date.

People will shake their heads at the amount of money here and what it says about the likely valuation. But as we noted in a review of Kabam’s games, the investors here aren’t crazy. Kabam clearly has users who are far more valuable than the standard social game player, because Kabam’s users are willing to pay Kabam a lot of money for a hardcore game experience on Facebook. Kabam’s four active games include Dragons of Atlantis, Kingdoms of Camelot, Glory of Rome and Global Warfare (below).

They’re all hardcore role-playing games where users play for four hours at a session, compared to maybe 10 minutes for a Zynga game. About 90 percent of Kabam’s players log into their games six or seven times a week. That’s what Kevin Chou, chief executive of Kabam, calls engagement. Those gamers are running the game in the background while they’re multitasking. That allows them to have lots of time to play all day long, even as they do other work. Such gamers would never have a four-hour stretch to play a console game.

Chou says that about 80 percent of the company’s players say they play hardcore games on the consoles or the PC. And now they are spending less time with those games and more time with Kabam games. This had to happen. With nearly 700 million users, Facebook has become a mirror of society. And society includes a lot of hardcore games. Kabam is one of the few companies to realize this and to target those gamers, who are accustomed to spending a lot of money on games. Kabam blends the immersive game play of massively multiplayer online games with the social satisfaction of social networking games.

Kabam was founded in 2007 as Watercooler and funded by Betfair and Canaan Partners. It had around 20 employees for quite a while as it experimented on Facebook, making sports fan pages and sports games. It had a big hit with its first major role-playing game, Kingdoms of Camelot, which quickly pulled in millions of users. The game still has 1.5 million monthly active users 19 months after its launch. Kabam also acquired WonderHill, a San Francisco game company that developed Dragons of Atlantis, which has become Kabam’s most successful game to date.

Kabam’s games are free-to-play, where users play for free and pay real money for virtual goods such as more Centurions for the Imperial Roman Army in Glory of Rome. While many users play for free. There is a sizable percentage of users who pay money for the time-saving aspects of the game. And the funny thing about hardcore gamers is that they’re willing to pay more than $60 to get their fix. Whenever Microsoft launches a new $60 version of Halo, it often creates a $125 “legendary” version for the biggest fans.

Ken Pelowski, managing director of Pinnacle Ventures, said Kabam’s typical user numbers are similar to the number of hardcore fans for each console game hit.

“Those console fans are migrating online to free-to-play games, and that is what Kabam is seeing,” Pelowski said. “But here, you don’t have to pay $250 for a box and $50 for each game. Here, you could play the game for free. You could pay hundreds of dollars. You could pay thousands of dollars. The high growth and high value of the user base justifies a higher valuation for the company.”

Kabam’s users are as dedicated as console gamers. They’re willing to spend more than $60 sometimes, just to get a much-needed advantage that will make them look good in front of their fellow alliance members (as many as 100 players can band together in alliances). Chou has said that Kabam isn’t really going after Zynga. It’s the anti-Zynga. It’s going after Activision Blizzard and Electronic Arts instead, with the aim of disrupting their traditional business, Chou said.

This is the place in the story where traditional game company executives cackle at the audaciousness of Chou. But there are a lot of former game industry veterans working for him.

Kabam doesn’t disclose its financial results. But the tea leaves are there. With just four games and $125 million in funding, Kabam has been able to grow from 25 employees to more than 400 in the past 16 months. Chou said the team will be shipping more impressive games, including five later this year.

Console gamers may laugh at the low interactivity of Kabam’s games now, but Chou says there’s a full pipeline of games coming, and each one will reflect learnings from Kabam’s direct observation of millions of gamers. Traditional video game executives would kill to get that kind of feedback. Global Warfare, Kabam’s newest game, has minimalist, cinematic-style cut scenes (as much as Facebook can handle) and it takes the game play from Glory of Rome to a higher level. The game forces players in an alliance to be more social by requiring them to coordinate assaults on strategic resources in the game. I’ve been playing it since it debuted on May 3, and I’ve spent most of that time getting ready to do real battle. That might bore other players, but I consider it to be a fun investment of my time.

There is some precedent for Kabam’s funding. The game industry took notice of the Kabam-style model of getting more dollars out of hardcore gamers when China’s Tencent bought the majority of Riot Games for nearly $400 million in February. Riot Games had only 1 million users playing one game, but those dedicated gamers spent a lot of money. In January, Kabam raised eyebrows and fears of a “bubble” in social gaming when it raised $30 million.

EA, for its part, has its own online role-playing game Lord of Ultima online on Bigpoint.com. But there’s an opening for Kabam to get big in this niche because many of the big traditional game publishers have left the PC game market to focus on the consoles. And the traditional game publishers who have entered the Facebook market are focusing on competing with Zynga for the new demographic of casual gamers on Facebook. No one is really competing directly with Kabam, except other startups such as Kixeye.

But Kabam has to walk a delicate balance with its users. It can get the games to monetize better by making ordinary tasks take longer and longer to do, like sending scouts on a recon mission. The users may get fed up and pay Kabam some money so that it can eliminate the wait. But if the users feel like Kabam is holding them up at every turn and deliberately trying to frustrate them, then they will move on to another free-to-play game that doesn’t treat them that way.

There are some risks for Kabam. The company can stage some massive battles where users send reinforcements to stop attackers from looting a city. But it takes a lot of computing power to make sure that the game doesn’t crash or make the wrong calculation in this kind of scenario. And overall, Kabam needs more servers because its users are online so much. Kabam has to make sure that it doesn’t hit a wall with Facebook’s infrastructure, which wasn’t really built for real-time engagement.

Over time, the social network platform will become better at running online games. And then Kabam will likely try to create games that include the animations and 3D graphics that hardcore gamers want. Chou says the company will also expand into new markets such as Asia, where there is a lot of potential among hardcore gamers. Pelowski acknowledges that there is still a gap where the best console games have a higher quality bar, but Kabam is starting to close that gap. And in the meantime, the company is still monetizing its current games very well.

All of that adds up to a lot of  value, says Pelowski. As to whether Kabam is part of a giant social gaming and social networking bubble, Pelowski says the underlying metrics of the business justify the investment.

Existing investors Intel Capital, Redpoint Ventures, and Canaan Partners also participated in the deal.

We’ll be exploring the most disruptive game technologies and business models at our third annual GamesBeat 2011 conference, on July 12-13 at the Palace Hotel in San Francisco. It will focus on the disruptive trends in the mobile games market. GamesBeat is co-located with our MobileBeat 2011 conference this year. To register, click on this link. Sponsors can message us at sponsors@venturebeat.com. To pitch a startup at the Who’s Got Game contest at GamesBeat 2011, click here.

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Article courtesy of VentureBeat » deals

Microsoft Shows Win Phone ‘Mango,’ Coming To Nokia

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Microsoft (MSFT) this morning offered up the latest iteration of its “Windows Phone 7″ operating system for smartphones, dubbed “Mango,” which the company promises will make smartphones “smarter and easier,” while adding 500 new features.

The software is expected to be available this fall, Microsoft said.

Engadget’s Tim Stevens, among others, is dutifully chronicling the debut event this morning.

Some of the initial points Microsoft is hammering on: It’s about people you connect with, not about “apps.” The “live tiles” — little squares that appear on the home page of the screen — have updates of developments surfacing on Twitter, LinkedIn (LNKD), and other information sources. Things like seeing people’s “profile pictures” as soon as they’re updated. A “groups” features automatically pulls together photos and other info for individuals you choose to associate together.

Microsoft is also demonstrating a smarter keyboard, with phrase completion. Different threads of conversation, such as Facebook and text messages, can be grouped together, the company said.

Microsoft said the software will be the first code it puts on the first phone developed in partnership with Nokia (NOK).

Microsoft shares are up 6 cents at $24.23.

Update: Business Insider’s Ellis Hamburger offers a video from the event that shows how Mango will perform multi-tasking functions. It is curiously similar to the “card view” used by Palm OS to jump between applications.

Article courtesy of Tech Trader Daily

Write-Offs: 05.23.11

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$$$ Spain and Italy Turn Against Greece Over Reform Efforts (NYT)

$$$ Dominique Strauss-Kahn told the New York hotel maid, “Don’t you know who I am! Don’t you know who I am?” while pinning her down during the alleged sexual assault, law enforcement sources close to the investigation told FoxNews.com…“Please stop. I need my job, I can’t lose my job, don’t do this. I will lose my job. Please, please stop! Please stop!” she told Strauss-Kahn, according to law enforcement sources. Strauss-Kahn allegedly responded: “No, baby. Don’t worry, you’re not going to lose your job. Please, baby, don’t worry,” Strauss-Kahn responded, according to investigators. (Fox)

$$$ Belgium’s Debt Outlook Revised to Negative by Fitch on Political Stalemate (Bloomberg)

$$$ ‘Fear Gauge‘ Tops 20 for First Time in Two Months (WSJ)

$$$ How An Inquiry Of Goldman Might Play Out (Dealbook)

$$$ LinkedIn site has security vulnerabilities-expert (Reuters via Easy Street/Heidi Moore)

$$$ David Stockman: “The real problem is the de facto policy of both parties is default. When the Republicans say no tax increases, they’re saying we want the U.S. government to default. Because there isn’t enough political will in this country to solve the problem even halfway on spending cuts. When the Democrats say you can’t touch Social Security, when you have Obama sponsoring a war budget for defense that is even bigger than Bush, then I say the policy of the White House is default as well.” (YouTube)

$$$ AIG Underwriters Signal Deal May Price at Close to $30 (CNBC)

$$$ Walker: US Worse Off Financially Than Euro Nations (CNBC)

$$$ Greece to start selling domestic assets to ease debts (BBC)

$$$ More banks targeted in US probe (FT)

$$$ Carlyle Returns Record $6.4 Billion in First Quarter on Strong Dealmaking (Bloomberg)

$$$ Former Fed Monetary Chief Madigan Hired by Barclays Capital (Bloomberg)

$$$ Steven Cohen wants a five-year-old stock manipulation lawsuit filed by Canadian insurer Fairfax Financial Holdings to go away. (Reuters/Unstructured Finance)

$$$ Hintz Says Smith Barney Is ‘Checkmated’ by Krawcheck, McCann (Bloomberg)

$$$ China’s Buffett plays the long game (FT)

$$$ Senate Banking chair Tim Johnson discusses hedge funds [AR]

$$$ IBM passes Microsoft’s market cap after 15 years (Reuters)

$$$ Lady Gaga Breaks Amazon (MarketBeat)

$$$ Barack Obama’s car, nicknamed ‘the beast‘, gets stuck (BBC)

Article courtesy of Dealbreaker

MSFT: Skype A Use For Int’l Cash; Nokia Rises

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Responses are trickling in to Microsoft’s (MSFT) announcement this morning it will buy Internet phone calling firm Skype for $8.5 billion.

The conference call with Steve Ballmer and Skype executives starts in just a little bit, at 11 am, Eastern, so there’s likely to be more response later today after analysts’ have had a chance to ask some questions and digest the whole thing.

I would note that Nokia (NOK), Microsoft’s partner in smartphones, is beating the market this morning on no particular news, perhaps a reaction to Nokia’s now having another arrow in its quiver given its partnership with Microsoft for phone software. Nokia shares are up 20 cents, or 2.4%, at $8.61.

Sandeep Aggarwal with Caris & Co., who rates Microsoft stock a Buy, writing early this morning before the formal announcement, thinks “an acquisition of Skype by Microsoft makes sense, given how important “communication” and “mobile” are for Microsoft.” The $8.5 billion price tag implies a 25 times multiple of enterprise value to Ebitda, “which is somewhat rich.” It also would imply $2 per share in proceeds to eBay (EBAY), he calculates, given the latter’s 30% stake in Skype.

Aggarwal sees Microsoft working Skype into its “Lync” server for businesses and maybe putting it into Office. There’s lots of ways to enhance Windows Live for consumers and also add to its Windows Phone 7 operating system.

Collins Stewart analyst Kevin Buttigieg, who also has a Buy on Microsoft, this morning writes that this “isn’t the kind of transformative deal investors may have liked to see Microsoft do with $8.5 billion.”

“Skype is a large deal at a relatively expensive price that doesn’t transform any MSFT business quickly or in a way which improves perception about its ability to compete in a post-PC world.”

It will require “solid execution,” he writes, which is not something Microsoft is known for, he writes. The deal appears to be neutral to Microsoft’s non-GAAP EPS.

Is this a hidden plus? Buttigieg points out that as Skype is incorporated in Luxembourg, which means that Microsoft can use some of its international cash, which is 80% of its cash balance, for the deal.

Article courtesy of Tech Trader Daily

Microsoft acquires Skype for $8.5B, headed to Kinect, Windows Phone, Office

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Microsoft this morning confirmed that it has acquired internet video chat company Skype for $8.5 billion in cash.

And just like that, Microsoft has become a key player in the world of video chat. The deal is also Microsoft’s biggest acquisition yet, which tells us the company is finally looking closely at the possibilities of video chat after seemingly ignoring the technology for years.

Early reports of the deal surfaced last night following on the heals of word that Skype has been in deal talks with Facebook and Google.

Microsoft says that Skype will support the Xbox 360 and Kinect; Windows Phone (which doesn’t support front-facing cameras yet) and other devices; as well as software like Outlook. The company will also continue support for Skype on other platforms like Mac and Linux.

Skype will be transformed into a new division in Microsoft, and Skype CEO Tony Bates will be president of that division.

While many are already calling this acquisition the end of Skype, there’s no doubt that the video chat company has a lot to gain from Microsoft. For one, it won’t have to worry much about its revenue problems anymore. Plus, Skype will finally be able to bring on more developers to polish its software — recent updates have added some cool features like group video chat, but the software has also gotten slower and more difficult to use in the process.

Of course, there is some reason for concern. Microsoft hasn’t yet proven it can deftly integrate an acquired company into its fold. And Skype already went through a failed acquisition by eBay in 2005, so the company must be worried about being mismanaged once again. But overall, it seems like both Microsoft and Skype may be able to benefit from this union.

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Article courtesy of VentureBeat » deals

Microsoft In $7B Skype Deal? Oh, How They Laughed When eBay Paid $2.6B

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The Microsoft (MSFT) -for-Skype rumor is gaining ground.

GigaOm’s Om Malik earlier today offered a recap of rumors that “have been swirling around Skype” for a week now, with Reuters having written that Google (GOOG) and Facebook were looking for a deal with the Internet calling firm, or maybe looking to buy it. Malik wrote that Microsoft “has entered the mix.”

And tonight, The Wall Street Journal’s Anupreeta Das and Nick Wingfield are writing that Microsoft is “close to a deal to buy Internet phone company Skype Technologies SA for more than $7 billion,” citing anonymous sources.

Negotiations have been “wrapping up” this evening, they write.

eBay (EBAY), which bought Skype for $2.6 billion in October of 2005,  later sold the company in November of 2005 for $1.9 billion in cash, for a net gain of $1.4 billion, and a 30% stake in Skype to private equity shop Silver Lake, the Canada Pension Plan Investment Board, and venture firm Andreessen Horowitz in a leveraged buyout.

eBay listed its 30% stake at $620 million in last year’s 10-K filing, implying a value of roughly $2 billion for Skype.

Obviously, then, a Microsoft bid of this size would represent not just a premium t0 recent valuation, but multiples of the 2009 buyout, if it happens.

Some people thought eBay was crazy when they paid $2.6 billion in 2005, and there were also stories from Silicon Valley that some Skype backers at the time thought they should have asked for much more.

Microsoft ended the fiscal Q3 in March with $50 billion of cash, cash equivalents and short-term investments, and long-term debt of $12 billion.

Remember that bidding for Skype has been a spectator sport for some time. Back in August of last year, TechCrunch reported Cisco Systems (CSCO) was interested, which was then refuted by sources, Eric reported the next day.

Malik himself proposed back in September that Facebook should buy the company, and that it might have to pay $7 billion to $7.5 billion.

Remember, too, that Skype filed for a $100 million public offering last August, led by Goldman Sachs, JP Morgan, and Morgan Stanley, which has since been amended multiple times. The latest version, filed last month, lists $860 million in revenue for all of 2010. That would represent 20% revenue growth from the $719 million the company reported in 2009.

Effectively, then, Microsoft would be paying on the order of seven or so times trailing revenue. Skype had a pre-tax loss of $57 million in 2010, according to the filing.

The prospectus from April also records $690 million in long-term debt that was racked up to facilitate the leveraged buyout in 2009, against $142.5 million in cash and equivalents.

Microsoft shares ended the day down 4 cents at $25.83.

Article courtesy of Tech Trader Daily

Microsoft close to buying Skype for $7B to $8B?

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Microsoft is close to a deal with Skype to buy the internet phone company for $7 – $8 billion, according to the Wall Street Journal.

If it’s true, it would be an aggressive move by Microsoft to become a big player in the convergence of communication, information and entertainment. The deal could be announced as early as Tuesday, according to sources cited by the Journal. Microsoft and Skype declined comment to the Journal.

The deal could still fall part. Including Skype’s long-term debt, the value could be about $8.5 billion. Skype allows users to make calls for free to each other over the internet. The service makes money when those users want to connect to someone with a land line or hold a video phone call with multiple parties.

Microsoft could use Skype’s name value to build out a bigger consumer business and integrate the popular service with its Xbox Live online gaming service. The deal could be one of the biggest that Microsoft has ever undertaken in hits 36-year history. In 2007, Microsoft bought aQuantive, an online ad firm, for $6 billion. And it almost bought Yahoo for $48 billion nearly three years ago.

While Microsoft has successfully moved into video games, most of its profit still comes from its Windows and Office franchises. Microsoft has a a communications platform called Linc, which ties together email, instant messaging, and voice communications into a single application. Skype could help enhance that. But for the most part, Skype would be a major diversification for Microsoft.

Of course, Skype has been part of a failed diversification in the past. The company was founded in 2003 by Niklas Zennstrom and Janus Friis, the creators of the Kazaa file-sharing technology that was associated with music piracy. Skype was disruptive, offering free phone calls when most carriers still charged for such service. Then eBay bought Skype for $2.6 billion in 2005, presumably so buyers and sellers could communicate in eBay auctions. That didn’t work out.

eBay sold a 70 percent stake to Silver Lake Partners, Index Ventures, Canada Pension Plan Investment Board and Andreessen Horowitz. Skype hasn’t had the best of luck making a profit. The company posted revenue of $860 million in 2010 and a net loss of $7 million. It has debt of $686 million. Skype had been planning to go public since last August, seeking to raise $1 billion.


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Article courtesy of VentureBeat » deals