Google's Global IP Solutions Deal: Taking on Skype?

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Google (GOOG) has acquired the Internet audio and video communications company Global IP Solutions (GIPS) for $68.2 million.

The search giant has made previous acquisitions in the online video sector -- most notably, its purchase of YouTube for $1.65 billion in late 2006. While YouTube has certainly been a dominant and disruptive force -- in terms of entertainment and even politics -- it's not clear that it makes any money.

But Google hasn't given up. In fact, the company has recently acquired Episodic (a video platform) and On2 (video compression). And this latest deal with GIPS looks like it is a move to take-on Skype, which certainly knows how to make money.

Big Technology from a Small Company


Founded in 1999 in Sweden, GIPS provides Internet Protocol (IP) voice- and video-processing technology for real-time communications. The technology is based on roughly 29 approved and pending patents. What's more, the customer base includes biggies like Samsung, IBM (IBM), Cisco (CSCO), and even Google itself.

GIPS's technology is fairly easy to integrate into virtually any application and is currently deployed in over 800 million end-points. Basically, the software helps to deal with problems like packet loss, echo and delay. No doubt, these can be big issues for real-time communications.

Despite its strong technology platform, GIPS is still a relatively small company -- especially in light of its blue-chip customer base. In the latest quarterly report, the company posted only $3.1 million in revenues. In other words, it looks like this business is tough to scale.

So why Google's interest? As is always the case with this company, it's not clear cut. But at a minimum, GIPS could be a strong differentiator in Google's mobile operating platform, Android. This is definitely the situation with the video technologies.

Next, GIPS could be helpful for Google's Voice, Talk and Office Apps offerings. More and more, consumers want multimedia experiences.

Of course, this strategy means going against Skype, which is a tough competitor. The service has more than 400 million users and is a global brand. So, it will be extremely difficult to unseat this company.

But real-time communications is a must-have feature anyway and will certainly bring more depth to Google's offerings, whatever its ambitions regarding Skype. And besides, the cost of the GIPS deal is small compared to the strategic importance of the technology.
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