Skype buys voice processing startup, which could help it avoid licensing fees it pays to its current tech provider.
Even for the technically challenged, making calls over the Internet is no longer a daunting task, and the cheap price offered by Voice over Internet Protocol providers has made VoIP a must for many long-distance phone users.
The Internet phone service Skype said that it has recently bought web voice processing startup Sonorit and its subsidiary Camino Networks for $27 million, to help “design and develop Skype for the future” with Sonorit’s technology and voice-specialized engineers.
eBay will issue 700,000 shares of stock to buy Sonorit and its subsidiary, Camino Networks. Skype said it bought the company for its engineering team, which should help Skype build new voice products for the future.
VoIP’s rapid rise has forced traditional telecommunication giants to reconsider their business plans and incorporate the prospect of providing networks online as an integral part of their future survival strategy. Moreover, the technology has encouraged companies that have had little to do with the telecommunications sector to get into the business, including major players such as Microsoft, Yahoo! and Google, all three of which have acquired smaller VoIP providers over the past year in order to get into the game.
Still, Luxembourg-based Skype Technologies, which has pioneered marketing Internet calling to the mass market, remains the single biggest player, and it appears it will continue to fight to keep that position.
It is also a move that industry watchers say could help Skype, owned by online auction giant eBay, eventually avoid paying licensing fees to the company Global IP Sound, which provides Skype with a voice processing technology.
Luxembourg-based Skype, founded in 2002 by Scandinavian entrepreneurs, offers free computer-to-computer voice over Internet Protocol (VoIP) calls and low-cost connectivity between computer and landline or mobile phones. Skype was bought last year by eBay in a deal valued between $2.5 billion and $4 billion and has more than 70 million registered users, but has remained an independent unit from eBay.
"We are excited about bringing the talented Camino Networks team to Skype. They will add considerable expertise to our world-class technology team," said Skype founder and Chief Executive Niklas Zennstrom.
Sonorit is a start-up based in San Francisco but also has offices in the Danish city of Aalborg as well as in Stockholm, Sweden, with a total of 10 employees, headed by Jonathan Christensen. It specializes in building software for speech processing and coding, as well as transmission of voice communications over the Internet.
"Camino Networks is focused on innovating for next-generation voice services. Joining Skype gives us access to the best platform for bringing our technology to users," Christensen said.
Last December, San Francisco-based Global IP Sound filed a lawsuit against San Francisco-based Sonorit for trade secret violations, stemming from the fact that several former Global IP Sound employees worked at Sonorit.
Despite the hefty price tag, eBay stated that the latest transaction will not have an impact on its full-year earnings per share for 2006. Furthermore, the company said that the acquisition will allow several experts in online voice engineering to join its current team of VoIP specialists.
“eBay obviously saw the cost of fighting a lawsuit better than the cost of paying the licensing fees,” said Jeff Pulver, founder of Pulver Media.
However, Mr. Pulver said startups like Sonorit are starting to develop voice processing technology similar to Global IP Sound’s. The development is a natural step in the VoIP industry. “GIPS [Global IP Sound] had a lock on this technology for a long time, and this is the tipping point,” said Mr. Pulver.
Skype spokesperson Lisa Hempel said, “At this point, Skype is still a customer of Global IP Sound, and Sonorit will continue to work on this technology.”
Wendy Toth, Global IP Sound’s vice president of marketing, said Skype will remain a strong customer. Ms. Toth also said Sonorit’s technology will not likely replace Global IP Sound’s. She also said that Sonorit is a new company without a fully formed technology solution yet.
Ms. Toth declined to comment on the company’s lawsuit with Sonorit.
In recent months, Skype has tried attracting new users by introducing new products that appeal both to consumers and small businesses.
For now, though, eBay has stated that it will remain a client of Global IP Sound, while Global IP has declined to comment on how and whether it will proceed with its lawsuit against Sonorit.
Further details of what the purchase will actually mean for Skype as well as eBay, which initially bought out Skype as a means to enhance its online auction capabilities, are expected to be disclosed when eBay files with the U.S. regulatory authorities including the Securities and Exchange Commission.