Skype CEO Says New Products, Partners to Fuel Growth

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Photographer: Tony Avelar/Bloomberg

Tony Bates, chief executive officer of Skype Technologies SA, said that partnerships with other companies such as Verizon Wireless and Samsung will be an increasingly important part of growth for Skype.

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Photographer: Tony Avelar/Bloomberg

Tony Bates, chief executive officer of Skype Technologies SA, said that partnerships with other companies such as Verizon Wireless and Samsung will be an increasingly important part of growth for Skype. Close

Tony Bates, chief executive officer of Skype Technologies SA, said that partnerships with other companies such as... Read More

Photographer: Tony Avelar/Bloomberg

Tony Bates, chief executive officer of Skype Technologies SA, said that partnerships with other companies such as Verizon Wireless and Samsung will be an increasingly important part of growth for Skype. Close

Tony Bates, chief executive officer of Skype Technologies SA, said that partnerships with other companies such as... Read More

Photographer: Tony Avelar/Bloomberg

A pool table sits next to nonfunctional phones on display as a joke in the employee recreation room at Skype Technologies SA's new 90,000 square-foot office in Palo Alto, California. Close

A pool table sits next to nonfunctional phones on display as a joke in the employee recreation room at Skype... Read More

Photographer: Tony Avelar/Bloomberg

A receptionist works in the lobby of Skype Technologies SA's new 90,000 square-foot office in Palo Alto, California. Close

A receptionist works in the lobby of Skype Technologies SA's new 90,000 square-foot office in Palo Alto, California.

Photographer: Tony Avelar/Bloomberg

A video conference station sits at Skype Technologies SA's new 90,000 square-foot office in Palo Alto, California. Close

A video conference station sits at Skype Technologies SA's new 90,000 square-foot office in Palo Alto, California.

Skype Technologies SA Chief Executive Officer Tony Bates will fuel growth by adding corporate partnerships and hiring engineers to build new products as the company readies for an initial public offering.

Bates, who joined the Internet calling company in October from Cisco Systems Inc., said in an interview Dec. 20 that agreements with other companies will be an increasingly important part of Skype’s development. He plans to hire as many as 500 people next year, most of whom will be engineers, to focus on new products and make sure that consumers have the same experience using Skype on their phone, desktop or television.

“More and more of us are living in a world of mobility that started off as convenience but now is becoming a richer form of communication,” said Bates, 43, at the company’s new 90,000-square-foot office in Palo Alto, California. “What we think is most powerful is not one modality -- it’s how multiplatform you can become. Consumers want choices.”

Bates faces the challenge of building new sources of revenue and coaxing money out of Skype’s more than 560 million users, of which only 1.4 percent pay for the service, according to a regulatory filing. Skype, which started as a way for consumers to chat for free, is developing premium services such as group video calling, pursuing corporate accounts and plans to raise $100 million in an IPO.

“Companies like Skype have a tremendous amount of opportunities,” said Bates. “You have to focus on the things that matter.”

Growing Pains

The company also faces growing pains as the number of users expands. Today, some Skype users had difficulty logging on to the service, a matter Skype said it was investigating.

Skype, based in Luxembourg, is using the Palo Alto office to attract Silicon Valley talent. Employees use phoneless conference rooms to communicate with headquarters, relying on Skype instead of traditional speakerphones.

Skype has agreements with carriers Verizon Wireless and KDDI Corp., Japan’s second-largest mobile-phone operator. Deals with Samsung Electronics Co., Panasonic Corp. and LG Electronics Inc. have led to Skype software being pre-installed on 40 million high-definition televisions, Bates said.

For the fiscal year that ended Sept. 30, Skype reported revenue of $830 million and earnings before interest, taxes, depreciation and amortization of $170 million, according to Naveen Sarma, an analyst at Standard & Poor’s in New York.

Estonian Roots

The company is the largest provider of international calling, accounting for about 12 percent, according to Washington-based research firm TeleGeography. EBay Inc., which bought the Estonian startup in 2005, sold most of its stake last year for about $2 billion to a group led by Menlo Park, California-based private-equity firm Silver Lake.

Bates dropped out of his studies as a mechanical engineer after one year at London Southbank University. His first job was loading time-shift punch cards into a computer in the early 1980s. His early work with computers and networking fed his hunger to learn more and provided valuable experience watching the industry transition from academia to the commercial realm, he said.

Bates said he hopes to build on that experience as well as on his insight gained from sitting on the board of YouTube, the video site owned by Google Inc.

“We’ve got great challenges that people want to work on,” Bates said. “You’re going to start to see us ramping up products.”

To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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