Yahoo Enters VOIP Fray

Light Reading
News Analysis
Light Reading
6/15/2005



Yahoo Inc. (Nasdaq: YHOO) is making up for lost time in entering the consumer VOIP arena. The company Tuesday confirmed a deal to acquire VOIP provider Dialpad Communications Inc. for an undisclosed amount.

The move comes less than a month after Yahoo announced enhancements to its Messenger IM application's VOIP functionality. With the addition of Dialpad technology, Yahoo users will be able to make calls from their PCs that terminate on the PSTN anywhere in the world (see Report: Yahoo Japan Dominates VOIP).

In short, the acquisition puts Yahoo! into head-to-head competition with Skype Technologies SA (see Skype Extends Its Tentacles).

“Dialpad provides Yahoo immediately with... [an] engine that routes international traffic and enables termination plus gives them the billing, OSS and capability to make a pre-paid offering that terminates and possibly originates PSTN calling,” writes VOIP analyst and blogger Andy Abramson after Yahoo confirmed the sale Tuesday.

The acquisition may even give Yahoo a leg up on Skype. “Since Yahoo is already SIP enabled, something Skype isn't, this also opens the door for more robust features that could even include video,” Abramson writes.

Yahoo will apparently use Dialpad technologies in other Yahoo properties as well. “Yahoo will leverage Dialpad's IP based services to further build upon its voice services as a core component of Yahoo's Communications Products as well as across the Yahoo network,” Dialpad says in a prepared statement released late Tuesday.

Less than a month ago, Yahoo announced that using its Messenger IM product, consumers can talk to friends and family anywhere in the world using a PC-to-PC connection. [Ed. note: Yes, but can they talk to their enemies?] With the addition of Dialpad technology, the person on the other end will no longer need a PC; they can use a regular phone.

News of the sale first appeared at Om Malik’s Broadband Blog Tuesday morning. A Yahoo spokesperson reportedly confirmed the sale around midday, a Business Week article appeared online late afternoon, and a prepared statement was released at the Dialpad site at end of day.

Neither Yahoo nor Dialpad would disclose the financial terms of the sale.

Yahoo spokesperson Joanna Stevens told the Associated Press Tuesday that new Yahoo products with baked-in Dialpad technology could debut in as little as a month.

Milpitas, Calif.-based Dialpad is one of the oldest VOIP players alive today, having been founded in 1999. The 400-employee company says it has registered more than 14 million users for its various calling plans.

— Mark Sullivan! Reporter! Light Reading!

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