Yahoo May Launch VoIP

Yahoo’s shares rise after an analyst writes that the Internet media company will launch a voice service.

August 15, 2005 - Red Herring

Yahoo will introduce a VoIP service in the next two weeks, according to
a prominent Internet analyst, in a move intended to give the Internet
media company an edge over its rivals.

The service would be comparable to Skype, a peer-to-peer downloadable
program that allows users to call for free over the Internet, Safa
Rashtchy, an analyst with Piper Jaffray, said in a research note Monday.

He expects that one service could be supported by an advertising service while another could be a paid premium service.

“VoIP is fast becoming the killer app of the Internet and this move
should push Yahoo ahead of its competitors,” said Mr. Rashtchy.

There has been talk that Yahoo’s chief rival Google might launch VoIP
down the road, but if Yahoo does indeed roll out VoIP in the next two
weeks, it could be first. Microsoft’s MSN offers voice over the
Internet through its messenger service.

Sunnyvale, California-based Yahoo already offers PC-to-PC calls through
its instant messenger. The company says that it has seen messengers
increase the amount they call by about 65 percent since the offering
debuted in May.

A Yahoo spokesperson said voice was a priority for the company. While
there were things Yahoo could evaluate across the network, she said the
company planned to focus on enhancing the messenger service right now.

As Yahoo already has the infrastructure in place, due to its PC-to-PC
calling service, enhancing the application beyond Messenger to include
a VoIP service wouldn’t require much of an effort.

Yahoo’s shares rose $0.16 to $34.76 in recent trading.

VoIP has become a growing means of communications as users around the
world seek to cut the cost of making calls. Skype, one of the VoIP
leaders, is apparently the subject of takeover talk (see Murdoch Wants

Mr. Rashtchy also pointed out that the fact that Yahoo had recently
taken a stake in Alibaba, a leading e-commerce player in China, would
help the company accomplish in China what it managed to do in Japan
(see Yahoo’s $4B Alibaba Move). Yahoo Japan is a market leader in
Japan, with a greater piece of the market than Google and other
Japanese companies.

On the legal front, Yahoo also had some good news Monday. Miva, an ad
marketing network, said it had settled a three-year-old patent
infringement lawsuit with Yahoo. Yahoo’s search marketing division,
Overture Services, which officially changed its name to Yahoo Search
Marketing earlier this year, had filed a suit against Miva over
technology that lets advertisers use an automated bidding system to
place ads on a search engine.

Miva will make a one-time payment of $8 million and get a license to
certain Yahoo patents on a royalty-bearing, non-exclusive basis.

Miva’s shares rose $0.49 to $6.17 in recent trading.

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