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.
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