Skype’s iPhone app part of broader strategy

Skype, Ebay’s internet phone service, will release on Tuesday its highly-anticipated application for the iPhone, expanding a push into mobile, an important part of its broader strategy for growth.

The application will allow iPhone users to make free Skype-to-Skype calls from any wi-fi zone, call landlines or mobile phones at a low rate, and use Skype’s instant messaging features.

Skype, which now has 405m registered users, is in the middle of rolling out a series of products the company hopes will bring its software to a greater array of devices. The iPhone application comes on the heels of similar mobile products launched in recent months. Last week, Skype expanded its offerings for businesses.

Scott Durchslag, Skype’s chief operating officer, said the company aimed to become the world’s leading communications software company. “The timing of all these product offerings are meant to reinforce each other and get to that point where you can have a communications experience flow across devices like water,” he said.

Skype has experienced tremendous growth in recent years. The company is attracting about 350,000 new registered users per day, and activity per user is also increasing. Last year, 8 per cent of international calls were placed using Skype, making it the largest international carrier, according to TeleGeography, the research firm.

But with its desktop product now well established, the company is seeking new users, and revenue, in mobile and business offerings. Earlier this year Skype released versions of its software for Java-enabled mobile phones, Windows Mobile, and as built-in feature on some Nokia phones. A Blackberry application is coming soon. Last week the company introduced Skype for SIP, a version of the service for the corporate telephone systems of small and medium sized businesses.

While Skype’s mobile and enterprise offerings give the company a toehold in two important markets, they are unlikely to disrupt major telecom operators in the near term. Instead, the new products may be part of Ebay’s positioning of Skype for a sale once market conditions improve.

Ebay purchased Skype in 2005 for $3.1bn, hoping it would be a valuable communications tool for buyers and sellers in its online marketplace. That vision never materialised. Today, facing increased pressure to sell Skype, Ebay chief executive John Donahoe deflects such questions. Skype, he said recently, “is a good standalone business.”

Yet Ebay is still making aggressive predictions about Skype’s growth. The unit posted $550m in sales in 2008, and expects to more than double that by 2011 to about $1bn. Skype’s profit margins are said to be around 20 per cent.

Cowen and Company analyst Jim Friedland said that while Skype’s new offerings may help the company broaden its reach, they are unlikely to persuade investors that the company makes sense in Ebay’s portfolio. “They’re doing all the right things, but it doesn’t really change the Skype story,” he said.

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