Analysis: Would Skype Vault Cisco into Streaming?

When it comes to "big iron" companies that equip service providers with routers necessary to handle terabits of internet data, the two companies that come to mind are Cisco and Juniper.

Bit deeper into the consumer space than Juniper

Cisco's gone a bit deeper into the consumer space than Juniper, with the 2003 Linksys acquisition slowly providing Cisco a foothold with almost 25% of U.S. internet-enabled consumers.

Skype's ownership is split between eBay, which currently owns 30 percent of the VOIP provider, and company founders Janus Friis and Niklas Zennstrom, who jointly own 14 percent. Silver Lake Partners, JoltID Ltd., Canada Pension Plan Investment Board, and Andreessen Horowitz own the remaining 56 percent of shares. The anticipated price point for Cisco to acquire Skype has already been set, as Skype set expectations in its pre-IPO filings of achieving approximately $5 billion in market cap when it goes public. 

Long history in Voice over IP

Voice over IPCisco has a long history in Voice over IP, starting with its acquisition of Selsius back in 2001. At that point, VoIP systems used H.323, the same protocol that was used in emerging IP-based videoconferencing. 

Now, most VoIP systems use Session Initiation Protocol (SIP), a protocol that allows for rapid setup / teardown of phone calls, mimicking a traditional SS7-based phone switch so much that SIP switches are now referred to as "soft switches." 

SIP also has the ability to use a variety of audio (or video) codecs, making it ideal for integration between a variety of traditional and soft switches. Skype Connect, the paid business version of Skype, fits nicely into this model.

SIP Profile for your PBX

"Use Skype Manager to set up a SIP Profile for your PBX, and buy channels," the company's Skype Connect website notes. "No more hardware to buy. What's more, Skype Manager you can centrally manage every aspect of Skype in your business from a single tool."

In other words, as Cisco has moved into end points, with its Cisco VoIP phones, as well as back towards its core competency in the network core with soft switches, Skype provides a way for Cisco to move rapidly into the desktop- and mobile-device software-based phone.

If software-based phones are of interest to Cisco, the concept of a software-based videoconferencing solution would be a master stroke in driving adoption of Cisco's telepresence and tele-health solutions.

Pre-emptive model against Google

Leverage low-cost voice calls on top of this-a service Skype already provides-and Cisco also has a pre-emptive model against Google and others who are entering the VoIP market.