Skype worries about iPhone, attracting business customers

Will it achieve the service levels to satisfy enterprise?

Skype is worried about whether the iPhone and other Apple products will undermine its VoIP services and is also insecure about whether it can achieve service levels good enough to lure business customers, according to the company's filing with the U.S. Securities and Exchange Commission in preparation to offering public stock for the first time.

Pros and cons of Skype IPO

"For example," Skype says in the SEC filing, "although our application for the Apple iPad, iPhone and iTouch is currently enabled to make voice communications over 3G networks, Apple or its carrier partners may choose to alter the terms of inclusion in its application store, effectively withdrawing this functionality at any time or develop competing applications, such as Apple Face Time, that may better integrate with Apple's devices."

See also: Skype’s SEC filing reveals huge revenue swings

This concern could be extended to Android or other smartphones for which third-party software is available. "Application store owners have ultimate control over the products and services made available through their channels and may choose to remove Skype from their stores or restrict functionality based on perceived competitive threat or cannibalization of their own products," Skype says.

Similarly, despite its current relationship with Verizon to sell Skype services, such relationships with carriers could become difficult if Skype is perceived as a competitive threat. "Our business strategy depends on our ability to continue to offer our products on a mobile platform. Mobile network operators may be reluctant to partner with us or allow our products to be used on their devices due to concerns about cannibalizing their business. We have already faced such reluctance by mobile network operators, particularly in European markets, in relation to VoIP and peer-to-peer applications generally," the filing says.

Skype's strategy also includes expanding products for businesses, but is concerned that its historically inconsistent support might keep customers away. "Business customers have different needs and often have more demanding expectations than consumers, and we will likely need to add product features and provide more consistent quality, among other things, in order to attract business customers," Skype says. "Although we have recently enhanced our capabilities in this area, these enhancements may not be sufficient to meet business customer expectations."

It may prove too costly to come up to snuff for businesses, Skype says, to make it possible to recover those costs.

Skype also worries that more established service providers have customer loyalty as well as broader service offerings that may make Skype a less-attractive alternative. "In addition, many business vendors offer unified communication systems that include products we do not offer, such as email. These vendors also are recognized brands in the business marketplace and have incumbent status, including, in certain cases, long-term customer contracts, and as a result, it may be difficult for us to replace them," Skype says.

Plus, IT staff that support these services may be comfortable with services they are already receiving, and may be reluctant to change. "If we are unable to successfully develop and market products to business customers, our results of operations may suffer," the company says.

A wild card tossed into Skype's growth plans is the role that third-party application developers may or may not play. "Our strategy contemplates attracting third-party developers and other companies to use our application programming interfaces to extend our platform; however, this is a recent initiative for us and we may not be able to attract developers and other companies interested in developing applications for our platform," the FCC filing says.

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Tags smartphonesbusiness issuesunified communicationswirelessAppleskypeNetworkingvoiptelecommunicationPhonescorporate issuesconsumer electronicsSEC FilingsU.S. Securities and Exchange CommissionSkype IPO

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Tim Greene

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