Internet calling firm Skype is reportedly in negotiations to buy voice-over-IP (VoIP) startup Gizmo5 in a bid to substitute Gizmo5’s technology for its current peer-to-peer (P2P) system. Skype’s P2P technology is the subject of a legal wrangle between the company and its founders, Niklas Zennstrom and Janus Friis, who sold the firm in 2005. Zennstrom and Friis's company Joltid still owns the disputed technology and claims Skype has violated the terms of its licensing deal.
Skype is thought to have tabled a USD50m offer for Gizmo5, but sources tell TechCrunch that the deal is yet to be agreed. Gizmo5 has raised USD6m in funding since launching in 2003, and has financial support from CEO and founder Michael Robertson which may take its total funding to as much as USD20m.
Robertson has repeatedly insisted that his service, which does not rely on P2P connections, is superior to Skype’s. However, Gizmo5 has only 6m users compared to Skype’s more than 400m, and the firm’s reported USD50m price tag is small change for Skype, which is valued at more than USD2.75bn. Though Gizmo5’s service is more expensive to run in terms of bandwidth costs, Skype may be in a position to abandon P2P and still turn a profit thanks to falling bandwidth fees.
Skype was recently rumoured to be searching for acquisitions in the internet chat space to strengthen its service and replace the disputed technology. The firm is also working internally on a replacement for the technology, but its overtures to Gizmo5 suggest the process is not proceeding rapidly enough to avert the threat posed by Joltid’s legal action.
