Skype loses steam as eBay boots CEO
Posted
Oct 01 2007, 02:42 PM
by
Kim Peterson
The most telling news from eBay's Skype announcement today is that it paid $530 million to settle an earn-out agreement. That doesn't sound so bad unless you consider that eBay was supposed to pay up to $1.7 billion as different revenue and profit targets were achieved. So to settle for a third of the total amount is an acknowledgement that things are not going as well as planned.
eBay spent $2.6 billion on Internet calling company Skype in 2005, drawing skepticism from many corners. The idea was that eBay buyers and sellers would talk to each other on the computer, and the increased communication would boost the number of eBay transactions. But eBay never seemed to follow through with this initial vision, and many active eBay users probably still don't understand Skype, how it works or what it does.
eBay tries to spin today's news by saying the payment "is reasonable given the progress and anticipated rapid growth" of Skype's user base. The company is going to eat that $530 million as well as an additional $900 million as an impairment charge for its Q3.
Heads must roll with that kind of screwup, and today brings the resignation of Skype CEO Niklas Zennstrom. eBay's chief strategy officer will fill in temporarily. Skype President Henry Gomez is going back to eBay corporate as a senior VP.
People have been following Skype's troubles for some time, observing that the new user growth was in decline and that paid minutes have been flat. Om Malik says eBay "clearly botched up this deal." VOIP Watch suggests there might be a Skype spinoff/IPO in the future:
"This would mean that real business management with track records of running big business are needed at the top. I expect this to all become more clear in the the next 30-45 days."
Maybe IPO hopes are what's keeping eBay's share price up today.
The pile-on continues. Henry Blodget says "the Skype acquisition gamble has failed" and that eBay should immediately sell it to Yahoo, Microsoft or Google:
"Skype is rapidly surrendering its early dominance of soft-phone VOIP to other more focused competitors, and if it stays within the eBay fold, we think further write-downs will be in the offing. Skype was a $2-$4 billion eBay hail-Mary pass, and it just officially fell incomplete. eBay should just acknowledge that and move on."
