Cisco wants to buy Skype

Just as a battle of internet call services begins to brew between Google and Skype, Cisco has waded into the fray with an offer to acquire Skype, which could potentially give it a big boost against the search giant’s entry into the market.

The news came through a source close to Michael Arrington at TechCrunch, which he said is “reliable”.

The timing of this move by Cisco, if true, is appropriate, as Skype filed an initial public offering (IPO) earlier this month which means that Cisco needs to get in there with an acquisition offer before the IPO process completes.

Cisco announced plans to buy ExtendMedia last week, partially aimed at improving its video conferencing offer. With Skype introducing video conferencing in May this may partly explain Cisco’s interest in buying it.

Insider information from Skype suggests an evaluation of the company at around $5 billion, which means Cisco would have to fork over big bucks if Skype is to hand over the reins.

When Skype filed its IPO with the US Security and Exchange Commission in early August, it planned to sell off $100 million worth of the company, the first step in making it a public firm. However, if the evaluation of $5 billion is true, it means only a fraction of the company will actually be in public hands.

It is not certain if this is just the first wave of sales Skype plans or whether it just needed to generate a large amount of capital very quickly, but it does raise some interesting questions about the future directions for the company. It has the choice of going semi-public, fully public, or selling up into private hands under Cisco. Are we about to have a bidding war on our hands?

Arrington reports that Google is interested in buying Skype. This makes a lot of sense, as it has recently launched its own VoIP offering. Arrington said that antitrust concerns may have been a blocking factor, however, particularly considering that they are now two of the biggest rivals in the call market.

Google’s Voice service, which it integrated into Gmail last week, is a serious contender to Skype’s throne, with users making one million calls in the first 24 hours of its Gmail launch alone. We asked Skype if it would reveal its own call figures for comparison then, but it was too busy shaking in its boots.

With the might of Cisco behind it Skype may stand a better chance against Big G. It remains to be seen if the offer comes to light or if Skype is prepared to accept it, but what is certain is that a lot of big names are seeing lots of dollar signs in the VoIP market.