Skype Sets Out Unlimited Long-Distance Calling Plan


The Luxembourg-based company's new plan is not a long-term contract. Subscribers can pick from three types of subscription plans and can get a further 33 percent for a 3-month or 12-month period before June 1st 2008.

Unlimited calls to landlines and cell phones in the U.S. and Canada are $2.95 per month; unlimited calls to landlines in Mexico City, Guadalajara and Monterrey are $5.95 a month; and unlimited calls to landlines in 34 countries are $9.95 per month.

The company's peer-to-peer software for Windows, Linux, Mac OS X, and Pocket PC platforms provide free Skype-to-Skype voice and video calls and instant messages.

According to the company, its 309 million registered users have made more than 100 billion minutes worth of free Skype-to-Skype calls. Users also can communicate without a computer using cordless handsets, mobile devices and other Skype Certified hardware. The company certifies and sells hardware products from more than 50 partners and work with third-party developers to create software to extend functionality.

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In 2005, Internet auction goliath eBay bought Skype at a hefty premium for $2.6 billion in cash and stock, plus another $1.5 billion if performance incentives were reached by 2009.

The rationale behind the acquisition, eBay said, was to leverage its "global marketplace and payments platform," the company said in a statement.

"Buyers will gain an easy way to talk to sellers quickly and get the information they need to buy, and sellers can more easily build relationships with customers and close sales. As a result, Skype can increase the velocity of trade on eBay, especially in categories that require more involved communications," according to the statement.

eBay also said that the acquisition enabled the companies to "pursue entirely new lines of business."

"In addition to eBay's current transaction-based fees, e-commerce communications could be monetized on a pay-per-call basis through Skype. Pay-per-call communications opens up new categories of e-commerce, especially for those sectors that depend on a lead-generation model such as personal and business services, travel, new cars, and real estate.

Although terms of Skype's performance incentives were not spelled out at the time of the acquisition, so far investors are not impressed with the company.

In its 2007 third quarter, reported last October, eBay took a $1.39 billion write off of its purchase for Skype. eBay had warned that a write off was in the offing, but many eBay watchers smelled blood and felt that the charge off illustrated the incongruity of the company's businesses and the unwarranted high price tag.

In March 2008, Josh Silverman took over as CEO of Skype; he was previously CEO of another eBay company, At the same time, John Donahoe became CEO of eBay, replacing 10-year veteran Meg Whitman.

Amidst the executive management musical chairs, Skype reported $126 million in revenue for the first quarter ended March 2008, representing 61 percent year-over-year growth. Skype added 33 million registered users in the quarter, ending the period with more than 309 million registered users around the world and now has the largest registered user base within eBay's portfolio of businesses.

"They have had better growth and for right now it seems to be a trade off that eBay is willing to make," said Cantor Fitzgerald analyst Derek Brown. "That said, we have not been supportive of the acquisition given the price and what we viewed as unlikely synergies between the core businesses. We still have not seen the synergies to a large extent."