October 04, 2010, 7:01 PM — You don't usually see "new CEO" announcements from two high-profile technology companies in the same day, but Internet phone company Skype on Monday joined Twitter in naming a new chief executive.
Unlike Twitter, however, Skype looked outside for a new CEO, choosing longtime Cisco Systems senior vice president Tony Bates, who will join Skype at the end of the month. Bates, who takes over for CEO Josh Silverman, also becomes a member of Skype's board of directors.
Two months ago Skype filed with the Securities and Exchange Commission for a $100 million initial public offering of stock. Skype was purchased in 2006 by eBay for no discernible reason. The online auction giant finally gave up trying to make Skype work with its core business, selling off its interests late last year.
Since then Skype has turned its business around. In 2009, Skype had a net loss of $99 million on revenue of $719 million. Through the first two quarters of 2010, Skype has revenue of $406 million and a net profit of $13.2 million. While the revenue growth isn't dramatic, the change from losses to profit is amazing.
So Bates walks into a situation of high expectations and daunting challenges. Topping the list of the latter is developing more revenue streams. As Skype noted in its S-1 filing, 87 percent of its revenue comes from SkypeOut, a service that allows Skype account users to call regular phone numbers over their computers. Other possible revenue sources include advertising (what else?), gaming and virtual gifts.
Then there's the enterprise. Indeed, "broaden our user base to include more business users" is among the four key strategies Skype identifies in its S-1 filing. And that's where Bates, an enterprise market veteran, comes in. Skype already offers software and services to enterprises and small businesses, but revenue has been minimal. Bates's hiring clearly indicates the company sees more revenue opportunities there.