Crunch Time Coming for Skype in 2011

As Skype's initial public offering nears, the question remains whether the company can turn its huge profile - which was mainly built on giving away services to consumers - to a successful business model.

The financial picture seems to track with an organization that gives a lot away: The company has 124 million users. It recorded $406 million in revenue in the first half of 2010, however had net income of only $13 million, which is less than Cliff Lee will be paid each year to throw perfect curveballs for the Phillies.

Calls between Skype end points are free, and constitute a huge portion of the company's business. The problem is that only 6.5 percent of Skype users make calls to mobile phones and landlines. These are not free and are the way in which the company generates revenue.

Skype's initiatives, including its outreach to the business community, have an improvised feel. It seems as if the company is casting about for a model that generates enough revenue, or rather than executing on a so then-established plan toward that end. The bottom line question is pretty simple - and pretty daunting: Will Skype be able to translate its free VoIP (Voice over Internet Protocol) service into something that firmly establishes itself as a successfully openly traded company, even if that service is fundamentally different than the business it runs today?

The good news for Skype is that the telecommunications sector is changing so rapidly that there will be opportunities to do creative things. To illustrate, the morphing of unified communications into unified communications and collaboration - the sinking of voice communications within collaborative applications instead of next to them - seems to be fertile ground for an organization with Skype's wide reach and sophisticated infrastructure.

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