• Business Week, Friday, September 12, 2008 11:30 AM

Whither Skype, indeed. Almost a year ago, eBay, which bought Skype for more than $2.5 billion in 2005, was forced to concede that it overpaid for the Web telephony company by as much as $900 million. In an interview with BusinessWeek, defensive-sounding CEO Jonathan Silverman claims, "There is this perception gap related to eBay and what people thought eBay would do with Skype."

In fact, there has been little to no relation between Skype's business of providing cheap and easy Web telephony tools, and eBay's core business of connecting buyers and merchants through an auction system. As writer Catherine Holahan says, "Silverman's task now is to ensure that Skype earns its keep." Otherwise, the auctions giant, whose stock has taken a beating this year, could be forced to sell the company, possibly to Google.

Even though Skype's revenues grew 51% last quarter, growth has slowed considerably, and the company still only accounts for a sliver of eBay's total sales. Meanwhile, Skype is losing some of its price advantage as the likes of Comcast and Time Warner start offering competing Voice over Internet Protocol services. Where Skype really needs to do damage is in the mobile phone arena. As the likes of Apple and Google open their handsets to third-party software, developers can give users the ability to install VoIP software that allows users to make cheaper Internet phone calls on their mobile phones.

Read the whole story at Business Week »