Cisco reported to call on Skype for deal talks

Cisco, the $40-billion turnover networking giant, is reportedly looking to buy Skype for around $5 billion, before the voice-over-IP service provider goes ahead with its plans of going public this year.

Silicon Valley blog TechCrunch yesterday reported, citing a reliable source, that Cisco has made an offer to acquire Skype before it completes its IPO process. It added, Skype insiders were hoping for an out of the gate valuation of $5 billion.

It also said that internet giant Google was also rumoured to be eying Skype, but anti-trust concerns may have prevented it from tabling an offer. Google recently added VoIP application for its Gmail service initially in the US and Canada, and later to other countries. (See: Google rolls out VoIP application for Google Talk) 

Luxembourg-based Skype, partly owned, among others, by eBay and Silver Lake Funds, had announced on 9 August 2010 that it was going ahead with its 2009 plan of going public this year and made a filing with the US Securities and Exchange Commission for raising $100 million through an initial public offering (IPO) in the US for general corporate purposes. (See: Skype files for $100-million IPO) 

Skype, which has not made a profit for most of its existence since 1999, is a leading global internet communications company owned by an investor group led by Silver Lake, which includes eBay Inc, Joltid Limited and Skype founders Niklas Zennström and Janus Friis, the Canada Pension Plan Investment Board and private equity firm Andreessen Horowitz.

Although eBay had outbid Google and Yahoo in acquiring Skype for $2.6 billion in September 2005, it hardly added any significant value to the company and eBay admitted that the acquisition was a strategic and financial failure.

Skype's software enables the world to communicate either freely or for nearly nothing and millions of individuals and businesses use Skype to make free video and voice calls, send instant messages and share files with other Skype users.