Archive

Posts Tagged ‘Tony Bates’

Microsoft Finalizes Skype Acquisition

October 14th, 2011 10:54 admin View Comments

Microsoft

suraj.sun sends word that Microsoft’s acquisition of Skype for $8.5 billion has officially completed. Quoting: “Skype CEO Tony Bates will be named president of the new Skype Division of Microsoft, and will have to report directly to Steve Ballmer. In a post on the Official Microsoft Blog today, Bates seemed unsurprisingly enthusiastic about the acquisition, describing it as a marriage of two ‘disruptive, innovative, software-oriented companies. Microsoft is committed to the ubiquity of the Skype experience – communication across every device and every platform will remain a primary focus,’ Bates wrote. ‘And we’ve only scratched the surface.’”

Source: Microsoft Finalizes Skype Acquisition

The Case for Silver Lake Not Being Evil Incarnate

June 26th, 2011 06:48 admin View Comments

When an employee cries foul against a big tech company or its greed-driven investors, it’s easy to take the side of the employee, especially when an employee comes forward on the record to state his or her case.

A wronged employee is inherently more sympathetic than a big, greedy private equity firm or a faceless corporation, and it’s rare that an employee will actually publicly take a stand. In the cozy, relationship-driven world of Silicon Valley no one wants to make a public stink about a perceived or even real injustice. The temptation is to just suck it up and move on.

But as this Skype story has continued to dominate another weekend of headlines many bloggers and tweeters are missing important facts in our zeal to defend wronged employees and demand that private equity firms– especially ones profiting off of an $8 billion deal– just do the right thing.

Behind the real story lies an important lesson about the dramatic ways compensation is changing in the Valley. Employees should never assume each employment contract is the same as the one they had before. That’s especially true now, as companies take longer to go public and new forms of liquidity like secondary markets emerge, compensation models are changing dramatically in the Valley. The importance of actually reading whatever it is you are signing is paramount, especially when you are joining a company that doesn’t fit the traditional venture-backed mold, which Skype most definitely did not.

Here’s the background on the Skype thing, as explained to me last night by a member of the investing syndicate. When the new CEO Tony Bates was hired, naturally there were staffing changes he wanted to make. The decision was made to terminate several executives and Bates started the proper process to do so. Investors had zero involvement with that decision, in fact there was never even a discussion of it at the board level. The timing coincided with the awkward period between announcing Skype’s acquisition by Microsoft and the deal actually closing.

It’s unfortunate timing for the executives in question, because they won’t get the full amount of the payout they would have gotten, had they not been fired. But Skype has argued it has to continue to run the company as if there isn’t a deal on the table, and Bates deemed that included firing these executives. Oh, and lost in the initial hysteria was the fact that they’re getting 75% of the payout anyway, so the amount of money Skype investor Silver Lake Partners was supposedly going to these lengths to screw them out of was pretty niggling.

This weekend, the allegations got worse. Former employee Kuo-Yee Lee has come forward saying he’s leaving and unlike those earlier executives, he isn’t retaining 75% of his payout. Indeed, his already vested shares are being taken away from him. The outrage is understandable. As Mike explained in his post, this runs a foul of how 99.9% of venture-funded startups’ employment contracts are structured in the Valley. Many people being quoted in the press have never seen a deal like this before, and any startup journeyman executive wouldn’t have known to expect it.

But there are two big distinctions that are getting missed in all the outrage. The first is that Silver Lake — Skype’s investor in question who structured the contract and is being called evil– isn’t a venture capital firm. It’s a private equity firm. And there is a difference between how option contracts are drawn up in the venture world and the private equity world.

As standard as getting to keep vested options if you quit before an investment is closed is in the venture capital world, it’s equally as common that you have to stay through the close of acquisition to keep them in the private equity world. Indeed, our sources says the Skype contract is a boilerplate agreement for all the companies Silver Lake invests in. And all of this was in the paperwork the employee signed. He just didn’t read it carefully, at his own admission, because he assumed it was like other option contracts of venture-backed companies. That’s not really Silver Lake’s fault.

A big reason private equity firms have this clause– from what I’m told– is they think it’s mercenary and disloyal for employees to join a firm that’s on a clear path towards a buyout, wait until a year and then leave with a quarter of their shares vested for another company before that deal is done.

Typically private equity firms are buying turn-around properties, not growing a new business from scratch. When you’re building a business from nothing, the company changes dramatically in short periods of time. It’s culturally acceptable that certain people are good at the early stages and those roles need to change as the company grows. That’s not the case with more mature targets of PE firms. It’s a simply different mentality and a different culture. Mike’s analogy of “What if Facebook did this?” is irrelevant, because a company like Facebook, as a classic venture-backed startup, would never do this. Comparing someone joining Skype in the past year to joining Facebook when it had three employees is about a similar as comparing me joining TechCrunch a few years ago to me joining the New York Times. Both Skype and Facebook are Internet companies the same way TechCrunch and the New York Times are both media companies. But that’s pretty much where the similarity ends.

This cultural disconnect is a big reason you can count PE deals in high-growth tech companies on about one hand. The two worlds historically don’t understand one another.

The other huge distinction is that Lee wasn’t fired like the executives we wrote about earlier, he voluntarily quit. It says that in his letter we reprinted earlier, but many reports are still lumping him together with the terminated employees, furthering the insinuation that the board fired him and yanked away options. As far as I can tell, that insinuation is still as incorrect as it was a week ago.

More to the point: Lee chose to quit just months before the acquisition would close, at which point, he would have kept the full value of the shares. The terminated employees did not have that choice. “Private equity firms view a buyout as a journey from a purchase to a sale and when employees leave along that journey there are good leavers who get fired and bad leavers who quit during the middle of it,” our source said. The “good leavers” or the people who got fired are getting paid out 75% of the total they would have made had they stayed through “the journey,”  because they didn’t leave voluntarily. If you chose to quit in the middle of that journey, it’s another story. “The call option isn’t something you would see in a normal VC deal, but that’s what he signed. By signing a contract you are verifying that you understand it,” our source said.

This clearly sucks for Lee. Obviously, he didn’t understand the agreement, otherwise he probably would have waited a few months to quit. I’ll admit I didn’t have a lawyer look at my TechCrunch option paperwork when I signed it, and I had no idea what the terms were from reading it myself. If something like this happened, I’d be furious.

But I also wouldn’t have held TechCrunch accountable if it said something different than I assumed. It’s a bit like those 34-page terms of service agreements you have to opt into to buy something from the Apple store. I doubt anyone has actually read the whole thing. But that doesn’t mean I can sue Apple if they try to enforce it.

Mike’s argues that an attorney could argue “fraud” because the contract was so rare for a venture-backed startup and it was natural that someone was confused. Possibly. But again, Silver Lake isn’t a VC firm and if this is their standard contract as our source says, that’s a lot harder to prove.

Originally we reported the amount lost by the fired executives “wasn’t even worth the phone call.” This new amount lost by employees who quit is even smaller according to our source: The total in dispute is between $750,000 and $1 million, across all employees who voluntarily quit. The idea that Silver Lake is spending time concocting Machiavellian schemes to save $1 million of an $8 billion deal makes people who say 9/11 was a hoax look rational.

If the amount is so small, why not just give him the vested shares? Because this is their standard contract, Silver Lake can’t without opening themselves up to lawsuits from all the other buyout deals where employees have to live by the same agreed-upon contract, engendering a full-on LP revolt. Meanwhile, Skype is balking at the coverage, because this was a guy they hired, promoted, gave raises too, and would have given a decent payout, had he stayed a few months for the deal to be completed, our source says. “The company feels they treated him really well,” the source said.

Regardless of how this plays out for Lee, this should be a wake-up call to employees, because compensation among startups and tech companies is changing dramatically. Increasingly, there’s not going to be any case that happens 99.9% of the time. While private equity deals may continue to be rare among tech companies two other big changes are underway: The switch away from standard option packages is becoming more pronounced, typically in lieu of larger cash compensation or restricted stock units.

Most of this has occurred at large companies, and it was sparked by Microsoft in the wake of the 2000-era bust when so man employee stock options were deeply underwater and never coming back to the late 1990s heady highs. Suddenly what had been a great tool to engage employees in the growth of a business became a depressing daily reminder that the company wasn’t going anywhere that weighed on corporate cultures. At one point Yahoo’s stock price was even displayed on the digital readouts of printers in the headquarters. Try looking at that one every day. Not very inspiring. There was– and still is in some quarters– a “show-me-the-money-style” backlash against options.

While Google has turned toward huge cash awards to compete, Microsoft and others have turned to RSUs. With RSUs you get the full value of the shares when they mature, not the value of the share minus the common share price when you were granted the options. In other words, RSUs don’t go underwater no matter how poorly a company’s stock performs; you just make less, but you still make something. Private companies have started issuing them too– mostly because they don’t count against the 500-shareholder rule.

But there are downsides to RSUs too. One is employees are frequently getting fewer of them, and culturally some people think they make a company culture less aggressive, because employees aren’t incentivized to push the company’s share price higher.

No doubt there are other unintended consequences of this shift that will come out later– just like they did with options after the year 2000 crash. Remember the shock of employees being held hostage by the alternative minimum tax on the spread of their options, regardless of whether the shares had now lost all their value? Scandals like these abounded in the early 2000s where employees argued the same thing that Mike argues in the case of Lee: That people didn’t understand the full implications of what they were signing.

Well, now you’ve been warned. Get a lawyer to look at your contract or beware. Because no company– evil or not– is going to do it for you.

Source: The Case for Silver Lake Not Being Evil Incarnate

Skype Investor: “Amount Saved on Firings Wouldn’t Have Been Worth the Phone Call”

June 20th, 2011 06:51 admin View Comments

Members of Skype’s investor syndicate are adamantly denying the Sunday Bloomberg story that implied that several Skype executives were fired because private equity firm Silver Lake Partners wanted to save a few bucks paying out the proceeds of the Microsoft-Skype deal.

We spoke with one just now who reiterated what other unnamed investors have said in the press this morning: That the decision was 100% Tony Bates’ call. Until the Microsoft deal closes, he has to run Skype like a stand alone company, and these were all executives he’d been considering firing for performance for some time. The timing had more to do with how long it took to go through the process than anything else, this investor said.

And, he noted, that these were all people on the business side of the house, not the technical side of the house. That indicates he was trying to fix part of the company wasn’t working, rather than a wholesale firing of people who stood to get big payouts.

This investor went further to say that there was absolutely zero board discussion about firing these executives, directly countering Bloomberg’s claim that directors were weighing in on who should be fired.

And here’s the kicker: The executives in question will be receiving 75% of what they would have made off the sale anyway. The remaining 25% is such a small amount of money that it wouldn’t even register on Silver Lake’s radar, this investor said. Or as this person put it more bluntly: “It wouldn’t have been worth the time to make the phone call, not to mention Tony would have told them to fuck off anyway.”

Source: Skype Investor: “Amount Saved on Firings Wouldn’t Have Been Worth the Phone Call”

Ballmer And Bates Sell The Skype Deal: We Think We “Can Reach Everyone On The Planet”

May 10th, 2011 05:21 admin View Comments

In the wake of today’s news that Microsoft is buying Skype for $8.5 billion, CEOs Steve Ballmer and Tony Bates just held a press conference to explain the deal and sell it to investors. The reaction has ben tepid, with Microsoft shares down about 1 percent so far today. As I’ve pointed out, Skype is a great company, but there are concerns that Microsoft paid too much.

In today’s press conference, Ballmer did a good job couching the deal in terms of Microsoft’s mission to bring people closer together through technology and make their lives better. “We will move beyond email and text to rich experiences. Talking to colleagues across the world will be as seamless as talking to them across the table,” he predicts.

From Skype’s point of view, the Microsoft deal could make it even more ubiquitous—from PCs to mobile phones to connected TVs. “This allows us to extend from hundreds of millions to billions of people,” says Skype CEO Bates. “We think this is a set of services that can reach everyone on the planet.”

Skype will become a new division of Microsoft, with Bates reporting to Ballmer. The product and brand will continue to exist, and Ballmer promised to “continue to support non-Microsoft devices.” So all of you Android and iPhone Skype users can breathe easy. But Skype will also become integrated into a variety of Microsoft products: Windows Phone, XBox Live and Kinnect, Outlook, Lync, Messenger, Hotmail.

It is clear that Microsoft sees Skype as more than just voice calls and IM. They made a point to note that 40 percent of Skype traffic is now video. (For instance, Ballmer imagines Skype and Xbox becoming “like a home video conferencing system, but one that costs just a few hundred bucks.”) Skype is being positioned as sitting at the nexus of mobile, social, and voice. Social is a bit of a stretch, but it does connect you to that “inner circle” of people you tend to talk to the most often.

In terms of why Microsoft did the deal, Ballmer confirms my earlier speculation that it was really bidding against the upcoming IPO and figured it was cheaper to buy it now. “Skype was on a path to IPO,” says Ballmer. “From our perspective it was better if we owned this company.” The offer was unsolicited, and went to SIlver Lake Partners, the lead investor of the syndicate that bought Skype from eBay 18 months ago.

Some Skype stats that were shared:

  • 170M users, growing 40% year over year
  • 600K new registrations every day
  • 207B calling minutes in 2010
  • 30M concurrent users on average
  • 40% of traffic is video
  • $860M revenues in 2010, grew 20%
  • $264M EBITDA in 2010, grew 40%
  • EBITDA margins expanded from 20% to 31% FY08 to FY10

video chat is now 40% ofSKyep use

Source: Ballmer And Bates Sell The Skype Deal: We Think We “Can Reach Everyone On The Planet”

Done Deal! Big Deal. Smart Deal? Microsoft Buys Skype For $8.5 Billion In Cash

May 10th, 2011 05:10 admin View Comments

The deal is done. Microsoft is buying Skype for $8.5 million in cash in its first sizeable acquisition since August 2008, when the Redmond software giant spent $486 million on Greenfield Online.

In fact, this is Microsoft’s biggest financial bet to date in terms of M&A, trumping its $6 billion+ purchase of aQuantive, which dates back to May 2007, in size.

The purchase price includes the assumption of Skype’s debt.

The agreement has been approved by the boards of directors of both Microsoft and Skype.

Skype will become a new business division within Microsoft, and chief exec Tony Bates will assume the title of president of the Microsoft Skype Division, reporting directly to Microsoft CEO Steve Ballmer.

The deal was first reported by GigaOM‘s Om Malik (he does that sometimes) and later confirmed by the Wall Street Journal, who cited people familiar with the matter.

The $8.5 billion question: did Microsoft overpay for Skype?

Perhaps, perhaps not. Only time will tell. As always with these things, the many tech industry pundits and analysts will look at this deal from all possible angles and then some, and still only a handful will end up being somewhat accurate when we look back in a couple of years.

From a non-financial point of view, the acquisition makes a ton of sense today, though.

Skype digitally connects dozens of millions of people on a daily basis, enabling them to communicate with each other through voice calls, chat messages and video conferencing.

There’s no doubt it’s a big brand on the Web (with both consumer and enterprise appeal, worldwide at that), and is poised to keep mattering in the next decade and beyond.

In August 2010, Skype filed to go public, expecting to raise $1 billion, but not long after appointing a new CEO, former Cisco SVP Tony Bates, the company put its IPO plans in the freezer while it looked for ways to generate more revenue from the popular service.

Skype’s 2010 revenue was $860 million, adjusted EBITDA was $264 million, and – as many are tripping over each others to point out – the company actually lost $7 million last year.

But looking ahead, chances for the business to keep growing, perhaps even acceleratingly so, are fairly big. In that sense, it’s a valuable asset to own (and to keep out of others’ hands).

The acquisition is subject to regulatory approvals and other customary closing conditions. Microsoft and Skype said they “hope to obtain all required regulatory clearances during the course of this calendar year”.

Since its former owner eBay sold the company to a consortium of investors formed by Silver Lake Partners, Joltid (the company founded by Skype’s original founders, Niklas Zennstrom and Janus Friis), the Canada Pension Plan Investment Board and Andreessen Horowitz in November 2009, the company has been pursuing an aggressive strategy to be available everywhere, anytime, both in enterprises, the living room, even classrooms and, very importantly, on smartphones.

Microsoft, of course, has the exact same ambitions of ubiquity, and Skype and recently acquired Qik fit nicely into many of its current product offerings: think Windows Phone (combined with Nokia), Xbox and Kinect, Bing, Office 365, Windows Live Messenger and other Live products, Lync, SharePoint, Internet Explorer, Azure, and so on.

The purchase also provides Microsoft with a wealth of p2p and collaboration technology expertise and intellectual property, an increasingly important asset to have these days.

It also brings reach: Skype’s user base is comparable to that of Facebook in terms of size (more than 600 million registered users, that is) and the social network in fact has tie-ins with Skype already on a product level.

Note that I’m not arguing in favor of the acquisition, but I can see the logic behind it.

Facebook was also said to be sniffing around Skype, according to multiple reports, but its interest in the VoIP company wasn’t nearly as profound as assumed, according to multiple sources close to the company. If you think about it, Zuckerberg and co didn’t really lose anything today (and remember: Microsoft is also a Facebook investor).

Whether you think the Microsoft deal makes sense or not, rest assured that companies like Google, Cisco and Apple, on the other hand, are not going to be too pleased about it. Not that either of them absolutely needed to own Skype, but in the hands of Microsoft it’s a much bigger threat to them than if it were still under eBay’s wings, or as a separate company.

As I wrote earlier, only time will tell if it will become indeed a significant threat, or a giant dud.

Source: Done Deal! Big Deal. Smart Deal? Microsoft Buys Skype For $8.5 Billion In Cash

Skype Revenue Up 20 Percent To $860M In 2010; Paid Users Up 19 Percent

March 7th, 2011 03:32 admin View Comments

As the company prepares for a public offering in the next year, Skype released an updated S-1 filing that includes several new revenue, income and usage numbers. As you may have heard, Skype initially filed for an IPO registration statement with the SEC, with the maximum proposed offering amount listed as $100 million (that is a placeholder amount.) It was thought that the IPO would take place early this year, but apparently the company’s newly appointed CEO Tony Bates is looking for more time to get Skype “in better shape.”

Skype says that it has grown its average monthly connected users by 38% (to 145 million average monthly connected users) and has grown average monthly paying users by 19%, from the three months ended December 31, 2009 to the three months ended December 31, 2010. Average monthly paying users have increased from 7.3 million to 8.8 million users. From December 31, 2009 to December 31, 2010, Skype has grown registered users from 474 million to 663 million users.

Net revenues increased by 20% from $719 million in pro forma 2009 to $860 million in 2010, and Adjusted EBITDA increased by 43% from $185 million in pro forma 2009 to $264 million in 2010. Skype’s net loss in 2010 was $7 million, compared to a net loss of $418 million on a pro forma basis in 2009 (which includes a $344 million charge incurred the settlement in the Joltid Transaction).

Skype ended 2010 with 911 employees, up from 733 in December 2009. Skype acquired mobile video startup Qik in January for $121 million in cash with $29 million in additional payments. As part of the acquisition, Skype added 63 employees from Qik.

In 2010, Skype users made 207 billion minutes of voice and video calls. In the fourth quarter alone, video calls accounted for approximately 42% of all Skype-to-Skype minutes, and in 2010, users sent over 176 million SMS text messages through Skype.

Source: Skype Revenue Up 20 Percent To $860M In 2010; Paid Users Up 19 Percent

Skype Teams Up With Citrix To Bring GoToMeeting Web Conferencing To Business Offerings

March 1st, 2011 03:55 admin View Comments

As the company looks to boost revenue in 2011 in advance of an IPO, Skype is pursuing an aggressive enterprise strategy. Today, Skype’s VP of Enterprise, David Gurle, is announcing a strategic partnership with Citrix Online, in which web conferencing software GoToMeeting will be integrated into Skype’s enterprise offering, Skype For Business.

Skype For Business is a paid desktop product that includes capabilities for multi-party video chat, screen sharing and conference calls. But the drawback of the product is that screen sharing cannot take place with multi-party video chat simultaneously.

With the addition of GoToMeeting, enterprise users will be able to turn on video chat for up to 10 participants as well ass conduct screen sharing courtesy of GoToMeeting. In addition, users will also be able to user GoToMeeting to create online audio conferencing meetings that users can join via Skype or through public switched telephone network (PSTN) phone numbers. The functionality will use Skype’s SILK audio codec, which will improve audio quality. We’re told the integration will roll out towards the end of this year or the beginning of 2010.

Currently, Gurle says that 37 percent of all Skype users are using the VoIP product for enterprise or business use. Of course, the challenge for Skype is getting business users to actually pay for the enterprise product. As we learned last August, only 8.1 million of out of a total of 560 million registered users at the time were paying to use Skype’s services. He feels that the addition of GoToMeeting to the business product will increase usage of the product from both big companies and small businesses. “Web and audio conferencing has been among the top requested features by our business users,” he tells us.

Skype isn’t commenting on the financial terms of the deal, but says that this is a strategic partnership that “has many dimensions.” It’s unclear what those dimensions are, but we can assume that Skype must be paying to license Citrix’s technology.

It’s important to note that the fact that Citrix and Skype are teaming up is in direct competition to Cisco, whose WebEx product competes with GoToMeeting. Last year, Skype brought on Tony Bates, who ran the enterprise group at Cisco, as CEO, following reports that Cisco was actually making a run for Skype. While Skype is pursuing a public offering, the Wall Street Journal reported recently that Skype’s owners could be open to a sale at $5 billion to $6 billion.

Source: Skype Teams Up With Citrix To Bring GoToMeeting Web Conferencing To Business Offerings

Report: Skype Delays IPO Until Second Half Of 2011 To Build Up More Revenue

January 26th, 2011 01:25 admin View Comments

The Wall Street Journal is reporting that Skype’s IPO is being pushed back to the second half of 2011. Last August, Skype filed for an IPO registration statement with the SEC, with the maximum proposed offering amount listed as $100 million (that is a placeholder amount.) It was thought that the IPO would take place early this year, but apparently the company’s newly appointed CEO Tony Bates is looking for more time to get Skype “in better shape.”

From the Wall Street Journal report: “Tony needs to get his feet underneath him and understand the business and the voice of the company,” another person familiar with the matter said. “The intention is to go when Tony is ready and when the macroeconomic climate allows the company to go.” The additional time may help Mr. Bates to get Skype in better shape and increase its value ahead of an offering. But there is also the risk the IPO market weakens, hurting Skype’s chance to go public or depressing the value of the company.

For Skype, the problem isn’t gaining users, it’s building lasting revenue. In its initial IPO filing, the VoiP company made it clear that it was searching for ways to bring in more revenue. Skype has been building out additional enterprise products as well as introduce additional consumer-facing products that require payments.

Skype is on track to pass $1 billion in revenues this year (its revenue run-rate for 2010 is $800 million). As of last year, Skype was averaging 124 million active users a month, but only 8.1 million of them were paying.

Source: Report: Skype Delays IPO Until Second Half Of 2011 To Build Up More Revenue

Skype CEO Will Offer Users Credits For Outage; Does Not Rule Out Malicious Attack

December 23rd, 2010 12:56 admin View Comments

Skype is still recovering from its massive outage yesterday, but it is getting back to normal. Instant messages still seem to have a delay (anecdotally, I am noticing that I hear the IM ping, but then it is hit or miss whether any message comes through), but voice calls are working fine. I know because I just spoke with CEO Tony Bates over Skype. He estimates that between 16 million and 17 million Skype users, or about 80 percent of the people who would be on the service right now, can use it. “We are bringing folks back on in a controlled manner,” he says.

Bates priority is to get the service back up and running and to make sure Skype does not lose the trust of its users. To rectify that, he is publicly apologizing to them for the downtime and will offer users some sort of credits, with more details on that coming out later today. (Yes, free calls!) This is the right approach, and reminds me of what Netflix does when its streaming movie service goes down (free movies).

The ultimate cause of the outage is still unclear (or at least Skype isn’t ready to talk about it yet). When I asked if Skype has ruled out a malicious attack, Bates responded: “We haven’t ruled anything out.” Here is what we do know. Many Skype clients on the open Internet act as “supernodes.” These are directories which act like a big peer-to-peer telephone book helping one Skype client find another. These supernodes somehow were overloaded and went down.

Skype had to put up new supernodes to make up for the outage, and did so by redeploying the servers normally used for group video and offline IM features. Those features are down right now. Pulling the servers from other Skype services seems like a short-term solution until Skype can figure out something longer term.

Whatever the ultimate cause, the incident shows up the weak spot in Skype’s network. Take down the supernodes and the whole service goes with them.

Source: Skype CEO Will Offer Users Credits For Outage; Does Not Rule Out Malicious Attack

Skype’s VP Of Enterprise On Future Strategy, Products And Competitors

October 16th, 2010 10:10 admin View Comments

It’s no secret that Skype has major ambitions for its enterprise business. When the VoIP company filed to go public, Skype publicly stated that it plans on adding enterprise products to its suite to help build additional revenues. And in a move that was clearly not a coincidence, Skype recently brought on Tony Bates, who ran the enterprise group at Cisco, as CEO. I recently spoke with Skype’s General Manager and Vice President of Enterprise, David Gurle, for an exclusive interview about the future of Skype for Businesses.

There are two major parts of Skype’s enterprise strategy: a business to business solution and a business to consumer product. In terms of the business to business suite of products, Skype is already offering businesses Skype Connect, which is a way for employees to make domestic and international calls using regular office telephones. Two weeks ago, Skype announced a partnership with telephony company Avaya to offer their customers Skype Connect. The company also recently launched the Skype Channel Partner Program which allows partners in the United States to sell endorsed IT support for Skype’s enterprise products.

While Skype seems to be steadily shoring up these partnerships with existing B2B products, there is a tremendous opportunity in offering Skype products for businesses to communicate with consumers. Gurle says that the company is developing a number of customized, industry-centric B2C products for enterprise companies. For example, Skype will soon be offering businesses a way to establish Skype-powered virtual video call centers, allowing enterprise customers to talk to their own customers across multiple devices, platforms, geographies, and more.

For each industry, there is a different video calling application. Another customer, a large financial institution that Gurle declined to name, wanted a custom Skype application to enable service representatives to use video calling to communicate with customers around the world. The client wanted representatives to be able to form a more emotional connection with customers with face-to-face interaction over Skype.

Gurle is working with an education company to develop a Skype technology that will help teachers and students learn over a realtime video connection. The hospitality market is also a potential revenue stream for Skype. The company is helping hotel chains provide business travelers with the ability to use high-quality Skype video calling for personal and business communications from their rooms.

While Gurle declined to name the current number of enterprise customers using its business products, he did say that Skype’s “sweet spot” is small to medium sized enterprises with a few thousand employees.

In terms of the competition, Gurle seems optimistic about his chances against Cisco and others. “We are smaller and can innovate faster than out competitors,” says Gurle. “We can react to a client’s needs in a way that very few other companies can.” One aspect of Skype that Gurle feels is a differentiating factor when it comes to competing with other companies is the fact that Skype’s technology has gained significant traction with consumers, making it easy for any enterprise to implement the technology with both employees and customers, since they are likely to already be familiar with how it works.

Skype, which is averaging 124 million users a month worldwide, stated in its recent IPO filing that users made 95 billion minutes of voice and video calls during the first half of 2010, with 40 percent of those minutes using video technology. The company recently landed a deal with Facebook, which should only expand its userbase.

When I asked him about Skype’s future, Gule says it is in creating a one-click solution to allow you to reach a partner, friend, manager, employee, or business contact from any platform.

As Skype prepares to ramp up its enterprise strategy, Gurle is looking to add talent in engineering, sales and marketing. He plans to hire “several dozen” employees in the next few months. Gurle , who joined Skype in January of this year, was actually based in Singapore until April, when he moved his team to Skype’s offices in Silicon Valley. He says that not only is there a greater talent pool on the West Coast, but Skype is targeting enterprise opportunities in the U.S.

But can Skype build an enterprise-focused business around its technology that can rival the business model of Cisco and others? While at Cisco, Bates was responsible for 80 percent of Cisco’s business, which amounts to $20 billion in revenue (and 55 percent of Cisco’s profits). Currently, Skype is on track to pass $1 billion in revenues next year, so the company still has a steep hill to climb when it comes to making money.

Source: Skype’s VP Of Enterprise On Future Strategy, Products And Competitors

YOYOYOOYOYOYO