Skype to Sell Phone Kits at RadioShack

Skype, the Internet-calling phenomenon that eBay Inc. (EBAY) acquired for $4.1 billion, is set to break into the U.S. consumer mainstream by selling its telephone kits in RadioShack stores.

Skype Technologies SA, which counts 66 million users of its free- and low-cost Web-based telephone services, mainly in Europe and Asia, said on Sunday that it will distribute Skype phone gear through 3,500 U.S. RadioShack Corp. (RSH) stores.

The move into retail promises to raise Skype's profile with U.S. broadband users who have begun using alternatives to traditional phone systems that rely on Internet connections on computers or phones from Vonage, SunRocket and others.

Skype, which has signed up 20 to 30 times more users than other broadband phone alternatives, offers simple-to-install software to allow users to call other computers or phones. It works like a music file-sharing service and needs no central phone network switches as Vonage does, making it cheaper to operate.

Radioshack provides a missing link by supplying phone headsets or handsets that most consumers will require in order to use low-cost Web-based calling, which costs only a few cents per minute or less to call long-distance or internationally.

"The retail pact with RadioShack is Skype's first general distribution deal with a retailer anywhere in the world," said Saul Klein, Skype's vice president of global marketing. Skype will be featured in RadioShack holiday mailings and catalogs.

"The RadioShack relationship is really our coming to America, Klein said in an interview. "You will be hearing more from us about retail relationships in other markets," he said.

Since a limited number of computers come with built-in microphones and speakers needed to make Skype calls via computers or phones, the company sells the microphones, earpieces and other accessories on its Web site. There are more than 200 phones and accessories for Skype users, Klein said.

Beginning Monday, Fort Worth, Texas-based RadioShack will feature Skype products in a special kiosk, including a new Motorola Inc. headset that uses short-range wireless Bluetooth technology to make calls via Skype, priced at $100. It will sell a $40 headset from Logitech and a $129 cordless phone from Cisco Systems Inc.'s (CSCO) Linksys unit.

The RadioShack kiosk will feature Skype starter kits for $5 with a simple earpiece/microphone, software and 30 minutes of free Skype calling time to any number in the world. Sales clerks will offer training videos and software to customers.

Ross Rubin, an analyst with retail sales tracker NPD TechWorld, said there is less momentum for Web-based calling in the United States, where flat-rate pricing rules. Overseas, high-per-minute charges has driven Skype's explosive growth.

But Rubin said the deal with RadioShack provides a network of sales clerks to explain Skype to U.S. consumers. They can encourage customers to try new cutting-edge cordless phones and headsets that link to computers rather than standard phones.

Skype competitor Vonage has attracted more than a million paying subscribers for its broadband phone service, mostly in the United States and among U.S. expatriates overseas.

Edison, New Jersey-based Vonage sells its phone gear and services via the Web and in a wide range of U.S. retailers, including RadioShack.

By contrast, Skype counts more than 2 million paying customers for its SkypeOut phone service, which allows users to place calls to the traditional phone network. Most Skype customers place free computer-to-computer calls. It will soon be offered in Europe to run on mobile phones with Wi-Fi links.

But Vonage is pursuing a more traditional phone service offering that competes with local fixed-line operators, Rubin said. Vonage is considering an initial public offering of its stock or a potential merger with a major U.S. wireless company, the Wall Street Journal reported earlier this month.