Last week we reported [1] rumors that Google bought Gizmo5, an Internet VoIP provider that competes with Skype for peer-to-peer and low-cost VoIP calls. TechCrunch had reported earlier that Google had bought Gizmo5 for $30 million, but the official announcement had yet to be made. According to Google's Voice Blog, the Gizmo5 engineers would be joining the Google Voice team, and while current Gizmo5 users would continue to be able to use the service they would not be allowing new members to join.

It started out with Skype looking for ways to replace their underlying software-base with a similar product. Rumor had it that Skype would soon purchase peer-to-peer VoIP startup Gizmo5 for around $50 million. But when Skype was able to settle with its previous founders, their source code was secured and there was no need to purchase Gizmo5. Google, seeing an opportunity to add to its Voice/Talk offerings, swept in and picked up Gizmo5 instead.

By picking up Gizmo5, Google Voice--which has until now been mainly a service that offered numbers that could ring multiple phones as well as forward and transcribe voicemail to a universal inbox--will be able to add low-cost and free VoIP calling over the Internet and via mobile phones. The move means that Google Voice will now be in striking distance to give Skype serious competition while simultaneously putting the new offering in danger of being held to the telephony rules it has been circumventing all this time.

For more:
- see this PCWorld article [2]
- see this article [3]
- see the Google Blog post [4]

Related articles
Forget Skype, Google acquires Gizmo5 VoIP startup instead [5]
[6]Let's make a deal: Skype founders are back and now own 14% [7]
Skype may by Gizmo5 [8]
Gizmo5 builds (yet another) bridge to Skype [9]