Need a job? Call Skype

Posted by Tammy Parker Tuesday, January 13th, 2009

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The current economic crisis is producing winners as well as losers and likely represents a seismic shift regarding the business models that will come to dominate world economies in the coming decade. This was obvious at the microcosm that is the annual Consumer Electronics Show in Las Vegas.

CES 2009 drew some 110,000 attendees, a decline of 23% from the 141,150 who attended in 2008, a year in which attendance was down from 2007’s attendee number of 143,695. To be fair, a new US$100 pre-registration fee implemented on Nov. 1 in order to weed out casual attendees contributed to the slower-than-usual show floors, but it was also quite clear that the hubbub which marked CES in previous years had become a casualty of economic malaise.

At a CES press conference, Scott Durchslag, COO of Skype, spoke of having a sense of “cognitive dissonance” because his business is skyrocketing despite the crush of media reports about economic doom and gloom. The company counted 370 million registered users at end-3Q08 and is hiring aggressively so it can keep up with brisk customer gains of 30 million new users every three months.
At the show, Skype announced a version of its VoIP calling software for Android smartphones and more than 100 Java-capable cell phones from LG, Motorola, Nokia, Samsung, and Sony Ericsson. An iPhone version of Skype could be forthcoming as well.

Such news tends to freeze the blood in the veins of most mobile operators, which are already suffering from plunging voice ARPUs. But one has to acknowledge that Skype’s ongoing takeup makes perfect sense, given that consumers and businesses are increasingly buying on the cheap. The company’s brand of inexpensive communications parallels discounter Wal-Mart’s low-end strategy. While other US retailers saw end-of-year sales declines, Wal-Mart Stores’ December 2008 same-store sales showed a 1.7% increase over the prior-year period.

Another fellow I spoke to at CES, an executive with a WiMAX chipmaker, also reported a sense of disconnection between the macroeconomic environment and his own microeconomic sphere. While marveling at the fact that an entire section of the Central Hall at CES was blocked off due to a lack of exhibitors, he commented that the pervading sense of imminent disaster didn’t reflect his own life. “I’m doing OK,” he said. “My family’s getting along just fine with no problems.”

There have been rumors of pending consolidation among small WiMAX silicon providers, but this fellow appears certain that he’ll land on his feet if that comes to pass.

For sure, employed workers who are able to pay their monthly bills are living in a much more pleasant space than those who have lost their jobs and are struggling to stay afloat. The ranks of the jobless are likely to grow in many sectors, the mobile industry included. Rumors are rampant about pending layoffs at Motorola’s handset division, which already cut 3,000 jobs after losing US$397 million in 3Q08. Operator Sprint Nextel has said it will close up to 20 call centers this year in search of cost savings and in March will slash 160 remaining jobs from its former Xohm-branded WiMAX unit, which merged with Clearwire on Dec. 1.

Many are looking to the incoming Obama administration to turn things around via new government-backed technology initiatives. But the transition team for Obama, who won’t be sworn in till Jan. 20, shook up the CES show floor with word that it is seeking an extension to the Feb. 17, 2009, broadcast digital television (DTV) transition deadline.

The delay would potentially impact the buildout of LTE networks planned by Verizon Wireless and AT&T Mobility in their 700MHz spectrum, which will be freed in the DTV transition. While there are logical reasons behind the push for a delay, critics contend that such a move clearly portends that this administration will be marked by more “politics as usual” rather than the envisioned technological achievements promised by a president who intends to introduce the White House’s first national CTO cabinet position.

With government spinning its wheels, consumer electronics businesses will be left on their own to save the day through technology innovations. But with customers increasingly focused on low-cost products and services, the question is whether they will be as likely to buy the innovative new Palm Pre device and accompanying 3G data service from Sprint as, say, a US$17.95 Barack Obama Bobblehead, which is dressed in superhero garb and bellows, “Yes, we can” whenever its head moves.